Argos shrugs off Sainsbury’s takeover distraction to post rise in sales
Retailer Argos notched up its best sales performance for two years as it shrugged off poor early spring weather and the “distraction” of its £1.4 billion takeover by Sainsbury’s.
Owner Home Retail Group said like-for-like sales at Argos edged 0.1% higher in the 13 weeks to May 28, while total sales rose 2.6% to £868 million, thanks to a surge in online sales.
The group said its digital makeover was bearing fruit as internet sales rose 16% in the quarter – its strongest growth for more than three years – with online sales making up almost half of all revenues.
John Walden, chief executive of Home Retail, said the group’s sales rise came against a “challenging backdrop of constrained seasonal product sales due to poor weather, on top of a deflationary pricing environment”.
Home Retail has had an eventful past few months, selling off its DIY chain Homebase to Australian conglomerate Wesfarmers for £340 million in February and agreeing a £1.4 billion takeover by Sainsbury’s a month later.
The deal is being looked at by the Competition and Markets Authority (CNA), but is expected to go through in the third quarter.
“Given the natural distraction that a transaction such as this can be for our colleagues, on top of the recent sale of Homebase, I am particularly pleased with our performance in the quarter,” Mr Walden said.
The group also revealed it may need to put aside around an extra £30 million after wrongly collecting too much in late payment fees from store card customers after discovering the issue was more widespread than first thought.
But it said this impacted less than 10% of Argos card customers and those affected would receive compensation of “double digit pounds”.
Mr Walden said: “It’s not a material number of customers and not a material amount of money per customer.
“But for each customer it matters. We will address it and treat customers fairly.”
The firm expects to write to affected customers over the next few weeks.
The group had already put by £17 million in its previous full-year results to cover charges, including the store card payment errors and redress for mis-selling of payment protection insurance.
The Argos sales improvement marks its first positive like-for-like sales for a year and a half and its best overall performance for two years, and comes after a sales decline of 1.1% in the previous quarter.
It added that underlying like-for-like sales at its 843 Argos stores rose 1% in the first quarter, stripping out the impact of more space in existing stores.
Argos said television sales bounced back after a tough year thanks to this month’s Euro 2016 football championship as well as strong sales of 4K TVs as households upgrade to the new technology.
It said best-sellers during its first quarter also included mobile phones, computers and tablets, while the group saw strong demand for furniture and sports goods.
But seasonal products were hit by the colder spring weather, while it also saw a drop in sales of white electrical goods, such as fridges and dishwashers.