9th June 2016
Argos has delivered its strongest sales growth in two years but the news was marred by the need to set aside £30m for redress arising from charging store card customers excess fees.
Argos’ same-store sales edged up 0.1pc in the 13 weeks to May 28, a turnaround from last year when like-for-like sales dipped 3.9pc.
The retailer has set aside at least £30m for customer redress, after discovering some store card shoppers had been charged “excess fees” for late payments.
The company said it discovered it had overcharged less than 1pc of customers by a few pounds after making a calculation error on penalty charges and that it would track down affected borrowers.
Internet sales grew 16% in the quarter and now account for 49% of total Argos sales. This was Argos’ strongest quarterly digital sales growth for over three years.
The group remains on track to complete the proposed transaction with Sainsbury’s in the third quarter of this calendar year.
George Salmon, equity analyst, Hargreaves Lansdown says: “Argos are putting aside a further £30 million to compensate financial services customers for mistakenly charging them late payment fees, which effectively wipes out the profit made by the division over the last five years. Given the pending takeover, the board of Sainsbury’s will probably be shaking their heads at the news, though in the grander scheme of things the sum involved is not enough to derail the deal.
“There were some encouraging signs at Argos, in particular the strong increase in digital sales. The proposed takeover by Sainsbury’s now looms large in the future of both companies, and could deliver significant benefits, however the outcome of two challenged businesses joining forces still remains very uncertain.”