UK's Home Retail warns on annual profit

The owner of Argos and Homebase, Home Retail Group, has said its full-year underlying profits could be slightly below market expectations.

Home Retail warned that "without any actions to mitigate the increase in wages" caused by the new living wage the group cost in the 2016/17 financial year will be around £15m.

"We would expect that management has a few better visibility on likely pricing/promotional levels at Argos and does not like what it sees", he said.

He went as far as to ask whether Argos was a risk of suffering a similar fate as collapsed chains Comet, Woolworths and Phones4U. Bad enough that chief executive John Walden had to admit to a hard first half, although Homebase held up reasonably well.

Last week it became the first high street retailer to offer same day delivery and collection on 20,000 products across all of its stores.

It said trading at Argos for the upcoming Christmas season seemed less predictable than usual, as both retailers and customers determine whether to repeat last year's trend of embracing the U.S.-inspired Black Friday shopping day.

It blamed a number of issues for the lower guidance, including the uncertainty surrounding "Black Friday" sales and an increased investment in the launch of Fast Track.

Argos' sales have been hit by the performance of a number of key electrical product categories as well as weaker overall market conditions in August, as previously announced. "Our uncertainty is just about the extent and about the patterns over the course of the season".

"It's hard to know what the pattern will be which is why we are uncertain and we express reservations".

He said if that was repeated there was a potential for disruption, though the firm had learnt lessons from past year and had improved its capacity to meet orders.