Although Home Retail warned that first half-year sales at Argos would likely fall, as it transitions the business into a digital retailer and battles weaker demand for electronic products, it said that its current marketing strategy had been successful.
“A key component of creating a universally appealing offer is brand positioning and communications,” said the company’s annual financial report.
It added: “And the new ‘Get Set, Go Argos’ campaign, which launched during FY15, has thus far received a positive response with the measure of a consumer’s likelihood to shop at Argos increasing to its highest level in three years. Customers’ attitudes towards products, breadth of range and quality have all improved as a result.”
Total sales at Home Retail edged up by 1% to £5.7bn for the year to February 28, with underlying sales at Argos up just 0.6 per cent, following a fall in demand for electrical products in the second half of the year, and rose 2.3 per cent at DIY chain Homebase, where a quarter of stores are set to close due to weaker market demand.
Underlying pre-tax profits, meanwhile, rose 14% to £132.1m, slightly ahead of analyst’ forecasts of £130m, but still less than half of those posted in 2010.
Home Retail’s chief executive John Walden said he expects Argos’ sales to improve in its 2015/16 financial year as the business adds more digital features and makes its in-store services faster.
The Argos brand’s move to make its stores digitally focused comes as digital sales grew by
10% year-on-year, now representing approximately 8% of total sales, over the latest financial period.
However, Walden admitted that there could be ‘modest declines’ for Argos in the first half of the year as it implements those changes across its estate.
“We have suggested that we may have modest declines year on year in the first half (at Argos),” Walden told reporters at a briefing. “A number of things suggest that we ought to be looking for an improved second half versus the first.
“Both Argos and Homebase contributed positive like-for-like sales and profit growth for the second successive year. I believe the strategic plans we are pursuing across the Group will enable us to innovate and lead in a rapidly changing retail market.”
Earlier this year, Argos opened new digital stores within existing Sainsbury’s supermarkets to step up its convenience push and reach wealthier consumers.