Argos stumps up £30m after a store card sales scandal

FIVE years of profits for the finance arm of Argos have been wiped out after it set aside £30m to compensate customers sold credit deals.

The retail chain, which is in the process of being bought by Sainsbury’s in a £1.4bn deal, warned it will have to write to shoppers who were incorrectly hammered with late payment charges or mis-sold payment protection insurance.

The total cost is likely to leave the firm nursing a £30m bill – the equivalent of profits from the division for the last five years.

Around one in ten of Argos store card customers are thought to be affected. And Argos has already put £17m aside to cover payments for PPI insurance mis-selling and some late payment fees.

The discovery follows new processes to ensure credit sales to customers were properly carried out – which found it had charged excess fees on late payments for some customers due to an accounts payment system error. It will now begin a more detailed review.

The £30m provision has been set aside to cover the refunds which include interest owed to customers on the money taken.

Chief executive John Walden said: ‘It’s not a material number of customers and not a material amount of money per customer. But for each customer it matters. We will address it and treat customers fairly.’

George Salmon, equity analyst at Hargreaves Lansdown, said: ‘Given the pending takeover, the board of Sainsbury’s will probably be shaking their heads at the news.’

Sainsbury’s was aware of the overcharging and is happy to go ahead with the takeover.

Argos revealed better than expected figures for the first quarter – the 13 weeks to May 28 – boosted by the sales of 4K televisions ahead of the Euro 2016 tournament.

Sales at stores open for more than a year were up 0.1pc with total sales of £868m. Digital sales accounted for almost half of sales in the quarter, including on mobiles which make up almost 30pc.

The group has been improving customer service and delivery, and has been promoting its Fast Track system of same-day home delivery and store collection.

Shares were down 0.19pc, or 0.3p to 160.7p.