Argos sales fall 10% as demand for TVs and video games slump

Home Retail chief executive Terry Duddy said three-quarters of Argos’s decline was due to poor consumer electronics sales A slump in demand for TVs and video games has triggered a sharp fall in sales at Argos. Shares in parent company Home Retail tumbled by nearly 14% in early trading on Thursday morning after it released disappointing quarterly sales figures for Argos, which is Britain’s largest TV seller by volume. The news sent a shiver through the retail sector, with shares in rivals Dixons and Kesa also suffering. Like-for-like sales at Argos fell by 9.6% to £817m during the 13 weeks from 27 February to 28 May. Home Retail’s chief executive Terry Duddy said three-quarters of the decline was due to poor consumer electronics sales. Sales of TVs plummeted by 20% while video games were down 25%. Duddy said that the overall consumer electronics market had declined by 20% over the period, with Argos matching that wider decline. “We said at the beginning of the year we would plan with increased caution and these figures reinforce that,” said Duddy. “It’s a big ticket and consumer electronics issue.” He noted that the Asda income tracker had shown a “real step down in disposable incomes”. But asked whether the government should push ahead with its austerity measures, he said the market was “hard to read” and there was “not enough evidence” to change course. He stressed that Argos managed to hold on to its market share, helped by good laptop sales. Argos sold 150,000 TVs in the quarter, compared with a total of 1.5m last year – accounting for one-in-five of all TVs sold in Britain. Margins dropped by 75 basis points as prices continue to fall. “You’ve got to do promotions,” said Duddy. “There’s some very sharp pricing in TVs and video games.” A 32-inch flatscreen TV can now be bought for £200 while a 37-inch set can cost less than £300. Seymour Pierce analyst Freddie George said: “Argos remains under pressure from a weak consumer environment while the food retailers continue to grab share in its core markets. The stock price, however, is underpinned by the dividend, which is unlikely to be reduced in the medium term.” Duddy now expects a ‘mid single digit’ decline in like-for-like sales at Argos this year, a touch down from the company’s previous forecast of a range between low and mid single negative digits. The second quarter will be tough because of the comparison with last year’s World Cup while the comparatives should get easier into the autumn when sales were depressed by bad weather last year. Matthew McEachran at Singer said: “We would expect downgrades today of £10-20m (5-10%) to current year [pre-tax profit] estimates. We remain cautious on earnings prospects given cost pressures and the group’s exposure to the UK mass market customer.” An Argos TV channel is due to launch in the next few weeks as the retailer, which lost its long-serving boss Sara Weller in April , attempts to reverse sliding sales. It is also expanding its book range and moving into children’s clothes. The company’s Homebase chain, on the other hand, benefited from the warm spring weather and the extra bank holiday in April for the royal wedding. Buoyant sales of garden furniture, plants and exterior decorating products pushed like-for-like sales 1.6% higher to £458m. Home Retail Retail industry Julia Kollewe guardian.co.uk

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