Argos and Homebase profits slump despite online sales growth

Argosrecorded more than 300 million website visits, driving £1.4 billion of sales in the last year, according to its parent company’s latest results.

Home Retail Group claimed that its full-year results for the 52 weeks to 27 February, showed that Argos is the largest internet retailer in the UK, behind Amazon. The Group also owns retailer Homebase, which reflected a growing web presence as well.

However, despite reporting a two percent increase in group sales, from £5.9 billion last year to £6 billion in 2010, Home Retail Group’s profit before tax for the year plummeted 11 percent to £292.9 million, from £327.7 million in 2009.

Terry Duddy, Chief Executive of Home Retail Group, said: "The year ahead is likely to remain difficult for UK retail. By continuing to invest and constantly develop our multi-channel leadership and differentiated formats, we will retain our competitive advantage and therefore remain well placed for the future."

Argos’s multi-channel business increased sales to £1.9 billion, which represent nearly half (3 percent) of the retailer’s total sales. More specifically, the internet generated 32 percent of Argos’s total sales, 22 percent of which were from customers using the company’s online Check & Reserve for store collection functionality.

The company said that this channel has grown by 36 percent for the second year running.

“Argos has continued to develop its multi-channel leadership over the last year and has strong plans in place to continue its position of competitive advantage,” Home Retail Group said in the financial report.

Over the past year, a key development in Argos’ website is its expansion of online customer ratings and product reviews. It plans to develop on this next year by implementing more product comparison tools, videos and better navigation tools. The company said it will also launch an Argos app for iPhones “soon”.

Argos said that it continued to reap benefits from improved stock ordering and replenishment system, and that it would continue to roll out a ‘voice put away’ process across all its stores over the next two years.

“This technology helps to automatically guide stockroom assistants to the correct location, with key benefits being quicker processing and further enhanced stock file accuracy, thereby improving availability and customer satisfaction,” Argos said in its results.

The retailer said that it was also developing improved online and kiosk payment methods, and better stock-finding tools on its website for the growing number of customers using its Check & Reserve service. The Group has a store refurbishment plan in place for Argos in the next financial year, with 130 stores being improved with new stock checker units, kiosks and call forward technology (Argos’ store collection system). It plans to refurbish around 500 stores over the next three years, which it expects will cost £70 million in total.

Homebase reported that customer use of its website stock check service has been “growing strongly” since it was rolled out to all stores towards the end of 2009. It said it had also achieved its target of making more than 30,000 product lines browseable on its website over the year.

“Customer response to these developments and other improvements in web content has resulted in significant increases in website customer satisfaction ratings,” it said in the report.

The company also said that online traffic had increased due to extended email and web-based promotions, and this year plans to increase the number of products that can be purchased online. Homebase has also launched a new gardening community site for customers, offering advice through videos, forums and blogs.

Meanwhile, Home Retail Group said that the migration last year of the account management system in its Financial Services division to a new platform had helped to lower processing costs. The division works in conjunction with Argos and Homebase to provide credit to customers.

The in-house store card operations has also recently launched a new online account management tool for customers, and plans to increase contact centre automation and trial an automated applications system in stores via Argos’ till systems.

Copyright © 2010 IDG Communications, Inc.

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