The retailer, which also owns DIY chain Homebase, will meet profit expectations of about az£320m for the year just ended. The figure is likely to fall close to£190m this year.
Argos’s sales rose 1.6 per cent in the eight weeks to February 28, but gross margin was down 125 basis points. Over the year to the same date Argos’s like-for-likes dipped 4.8 per cent and margin slid 100 points.
In the coming months Home Retail is expected to suffer as sterling’s weakness pushes up sourcing costs. It will pass on as much of the increase as possible to consumers but is determined to stay price-competitive.
Chief executive Terry Duddy said: “The environment for the new financial year will be extremely challenging. We are responding with the necessary trading and cost actions, and believe the group will maintain its strong relative position.”
The retailer has booked a£35m exceptional charge for organisational restructuring - expected to deliver annualised savings of£50m - and an additional£100m relating to impairments of store-related assets and onerous lease provisions at Homebase.
KBC Peel Hunt analyst John Stevenson said dollar-led inflation is a threat but was factored into forecasts. He said: “With significant net cash balances and a value offering, we expect the shares to remain well supported.”
However, ING’s Peter Brockwell warned: “We see increasing risks and worsening medium-term earnings visibility.”