Argos after-tax profits fall sharply despite sales growth

BRITISH CATALOGUE retailer Argos saw its after-tax profits in Ireland decline sharply last year in spite of a 14 per cent growth in sales.

In accounts just filed for its Irish subsidiary, Argos directors also warned that the outlook for the business had "deteriorated significantly" for 2008/2009.

"Market turmoil together with the economic consequences of interest rate movements and reduced credit availability has severely impacted consumer confidence resulting in a significant consumer slowdown," the directors' report said.

Accounts just filed for Argos Distributors (Ireland) Ltd show that it made an after-tax profit of €579,000 in the year to the end of March 2008 compared with €17.9 million in the 11 months to the end of March 2007.

Argos's Irish arm changed its year end following the demerger of its parent, Home Retail Group, from GUS plc in 2006.

The reduction in profit was largely due to a foreign exchange loss of €14 million incurred during the period.

In addition, Argos took a hit of €3.1 million on its "hedging reserve".

The decline in profits was also due to sharp rises in administrative expenses and selling costs, which resulted in its operating profit declining by 27 per cent to €13.4 million.

Argos's Irish business closed the period with accumulated profits of €91.7 million and shareholders' funds of €314.5 million.

No dividend was paid to its UK-based parent.

Argos's Irish sales rose to €315.4 million last year from €275.7 million in the previous 12-month period.

But its gross standard margin declined by 1.8 percentage points to 29.6 per cent due to "increased participation" in lower margin areas, including video games, satellite navigation systems and toys.

The retailer said sales of televisions and video games "saw exceptional growth", driven by new digital technology and gaming platforms.

Sales of personal electronics and cameras also experienced good growth.

Argos opened five new stores in Ireland during the period, in Ashbourne, Arklow, Carlow, Monaghan and Cork. It has 36 stores here and also sells via phone and the web.