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Argos detects signs of hope for upturn

Terence Wilkinson
Tuesday 18 August 1992 00:02 BST
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A GLIMMER of hope on the high street was offered yesterday as David Donne, chairman of Argos, the catalogue showroom retailer, claimed that the low point in the consumer spending slump may now have been reached.

He was speaking as Argos announced an 11 per cent fall in pre- tax profits from pounds 10.7m to pounds 9.5m in the 24 weeks to 13 June and a 4.8 per cent increase in the interim dividend to 2.2p.

The decline in profits came after charging start-up costs of pounds 2m on the launch in March of Chesterman Home Furnishers. Argos shares rose 15p to 219p.

Sales rose by 3.4 per cent to pounds 331.8m, but as new store openings increased selling area by 4.3 per cent there was an underlying fall of 0.9 per cent in sales on a like-for-like basis.

However, that compares with a fall of 2.6 per cent during 1991, and since mid-June Argos sales have shown a slight improvement and are marginally positive on a like- for-like basis.

'While this does not necessarily signal an end to the recession it does give some encouragement that the low point in consumer spending may have been reached,' Mr Donne said.

The Argos catalogue ranges from the relatively buoyant toys, consumer electronics and jewellery to DIY, textiles and electrical goods, where sales have been falling.

Competitive pressures have kept price increases down to 1 per cent for the catalogue as a whole in the first half of the year. Prices will be even keener in the second half as 80 per cent of Argos products will be at the same price or cheaper.

Chesterman Home Furnishings, launched after five years of market research by a typically cautious Argos, has been a disappointment as sales have come in 'significantly' below target.

Originally aimed at the middle to upper end of the pounds 3bn furnishings market, where it was thought that the recession was having less impact, Chesterman's range will be re-directed in future towards mid-price products, according to Mike Smith, the chief executive.

Advertising and promotion, including television slots, will be increased. But the four pilot Chesterman outlets are likely to incur trading losses of around pounds 2m in the second half, Mr Smith said.

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