Argos owner braced for tech battle
Argos owner Home Retail Group has warned of a "challenging" few months ahead as the retailer battles to transform itself for the digital age.
Chief executive John Walden admitted customers had experienced delays and disruption while its technology struggled to cope with "extreme" online demand.
Like-for-like sales at Argos rose 0.6% in the year to the end of February, compared to 3.3% growth the year before.
DIY chain Homebase, also part of Home Retail Group, saw its growth slow too, from 5.9% to 2.3%.
It comes after the wider group surprised the City last month as it posted a sales decline at both businesses at the start of this year.
Mr Walden admitted that the five-year plan to transform Argos, now two years in, had "not unfolded exactly as we originally envisioned".
Annual results today showed the group grew benchmark pre-tax profits - stripping out one-off items and other costs - by 14% to £132.1 million, with operating profits for Argos up 15% to £129.2 million and for Homebase up 5% to £19.8 million.
Mr Walden said economic conditions had shown signs of improvement during the year with low inflation, higher employment and real terms wage growth.
He added: "We are hopeful that as the uncertainty of the general election passes, businesses and consumers will become more confident in the economic environment for the balance of the year."
However he said the group was planning conservatively for "only low levels of market-driven growth".
Mr Walden said: "Our sales performance in the first half is likely to be more challenging, as Argos focuses on improving its technology and customer experiences."
He added that it would be affected by comparisons with last year "in certain slowing technology categories and strong seasonal performances in both businesses".
"The second half should improve as we look forward to introducing new Argos digital offers in time for peak trading."
Mr Walden said a "digital revolution" was causing "disruption and change" as retailers ploughed investment into a faster-paced and more technologically-driven competitive environment.
He said the transformation of Argos had seen "minor delays and temporary customer disruption" though there had also been positives from small format digital stores and partnerships with eBay and Sainsbury's.
Mr Walden added that the drive to improve technology infrastructure had been "more challenging than originally envisioned".
He said: "Our team has faced unanticipated pressure on the resilience and scalability of existing systems due to extreme online volumes and volatility during the peak trading period."
The year saw online account for 46% of total Argos sales.
Meanwhile, Homebase saw "good progress" in a plan to reduce the number of stores by 27 to 296.
The wider group's full-year dividend increased 15% to 3.8p. Shares rose 2%.
Investec analyst Alistair Davies said results were at the upper end of expectations despite ongoing cost investments and store closures.
He said "negative trading conditions" were likely to persist in the first half but a rebound in the second half would "act as a positive catalyst".
Express and Star