The Week Ahead: Updates due on trading at Argos, Homebase and Debenhams
- Credit: PA
The City will this week focus on retailers ahead of the key Christmas season, with Argos expected to see its half-year results fall, amid an ongoing revamp, while Debenhams is forecast to see profits edge higher.
Argos owner Home Retail Group is expected to post a fall in profits on Wednesday, despite its efforts to turn itself into a cutting-edge digital retailer.
The City expects the group, which also owns DIY chain Homebase, to report pre-tax profits down by 1.9% to £30.3 million, as Argos struggles to boost revenues from electrical products and big ticket items.
The firm said last month that comparable store sales at Argos dropped 2.8% in its second quarter after a disappointing August, although this was an improvement on the 3.9% slide over the previous three months.
Argos said sales of electrical products, as well as white goods such as fridges and dishwashers, continued to come under pressure, although toy sales were strong over the summer. Like-for-like sales across Argos over the half year as a whole were 3.4% lower.
The figures are in stark contrast to those of rival Dixons Carphone, which cheered like-for-like sales growth of 10% in the UK in the 13 weeks to August 1.
Home Retail saw overall trading buoyed by Homebase as like-for-like sales across the DIY chain lifted 5.9% in its second quarter, although this was partly driven by stock clearance sales as it closed eight stores over the summer. Like-for-like sales at Homebase over the half year as a whole were 5.6% higher.
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Last October the group embarked on a three-year plan to close about 80 Homebase stores, a quarter of its then 323-strong estate, saying that consumers had “fallen out of love with DIY”.It has so far closed around 27 stores in this financial year, and plans to close 35 more next year.
Analyst Freddie George at Cantor Fitzgerald said the group has so far sold off stores that were too large or based in poor locations, making the remaining estate more attractive.
Mr George added that Homebase was “a contender to be sold over the next 12 months,” strengthening the group balance sheet and giving it the room to make acquisitions, possibly in online retail.
Home Retail Group added in its last update that it saw “encouraging early results’’ from new stores opened under the digital makeover of Argos after it launched more than 50 digital concessions in Homebase and Sainsbury’s. It is also refitting a raft of Argos stores to include fast-track collection and ordering from iPads rather than catalogues.
Earlier this month Argos stepped up its advance into digital shopping with the launch of a same-day delivery service in the UK, putting it in competition with US giant Amazon. Argos said its Fast Track service would be available in four time slots throughout the day until 10pm, for a flat fee of £3.95
However, many critics say Argos’ traditional dowdy image will see it struggle to thrive in the current online sales environment.
Home Retail shares have lagged its peers falling around 28% this year.
Department stores chain Debenhams is set to see profits edge up when it posts its full-year results on Thursday as it continues its revamp.
The City expects the retailer, which has 162 UK stores and more than 240 outlets worldwide, to report annual pre-tax profits up 1.4% to £111.8m, as its refreshes its ranges, cuts back on sale days and launches more concessions at its stores.
Analysts at Numis forecast the group will post marginally positive like-for-like sales in the fourth quarter, building on flat like-for-like sales in the third quarter, as the group shifted many of its promotions into the group’s first half, producing three fewer days of special offers.
Debenhams has been overhauling its ranges as part of a turnaround plan to boost sales. A number of stores carry clothes by designers such as Savannah Miller, Ben de Lisi and Hammond & Co by Patrick Grant and childrenswear by Ted Baker and J by Jasper Conran.
The firm recently opened a new outlet in Wandsworth, and is set to open four more this autumn in Bradford, Rugby, Beverley and Newport.
The chain is also renting out some of its under-used floor space to other retailers in a bid to boost revenues. It is launching further trials to make use of its store space, with new partners including Costa Coffee, Monsoon, Patisserie Valerie, BHS lighting and Chi Kitchen, a pan-Asian restaurant from the owners of Mango Tree.
Debenhams is also launching more concessions with sportswear retailer Sports Direct, with another four due to open by the end of the financial year, on top of four already launched.
Analysts at Jefferies said the moves have left Debenhams “well placed for good Christmas trading.”
However, others still think there is much to do. Paul Thomas of retail consultancy Retail Remedy recently said Debenhams had “clearly lost its way” and was losing out to resurgent rivals Marks & Spencer and House of Fraser.
He said: “Debenhams’ sales, much like its image, are stuck in limbo. Given the tired feel of many of its older stores, some will view its dead flat sales numbers as a modest success.
“But you can’t help feeling that in many instances the once venerable brand is living on borrowed time.”