Argos rise in sales is dampened after Black Friday stir

HOME Retail Group missed sales forecasts for its Argos and Homebase chains over Christmas as the shopping frenzy sparked by Black Friday skewed demand later in the holiday season.

The US-imported sales day took hold in Britain in 2014. Argos saw its sales jump 45 percent on November 28, when 13.5 million people visited its digital channels and thousands more its stores to snap up discounted products.

Several retailers have since said the cost was a sharp drop off in demand in the following weeks and an expectation for continued discounts, posing a threat to profitability.

Home Retail said it had taken a much more cautious approach to discounting. As a result, sales from Argos stores open over a year were up 0.1 per cent in the 18 weeks to January 3, well below the two per cent growth that had been expected by analysts.

With Homebase sales only up 0.6 per cent, against a forecast of 4.1 per cent, shares in the group were down seven per cent in early morning trading, although the focus on margins meant it still expected to hit its full-year profit before tax target.

Argos gross margins were up around 25 basis points, which analysts at Investec said marked the first time they had grown in the Christmas quarter in seven years.

“It would (have been) easy to get into a position where everything is on sale and everything gets cherry picked and you end up with a real profit problem and that was the challenge we tried to avoid,” Chief Executive John Walden told reporters.

John Lewis, Britain’s biggest department store, said it will seek to temper its approach Black Friday this year and Walden said he expected others to take a more cautious approach to what goes on sale.