Home Retail, the owner of Argos and Homebase, has urged the government to give some help in next week's budget to low and middle income consumers - its core customers.
It agrees with proposals to raise the threshold at which people begin paying tax, the company said after reporting another set of falling sales in the fourth - eight week - quarter.
Argos like-for-like sales dropped 8.5% while Homebase fell 6.5%. The company said it was still on course to meet full year profit expectations (of around £99m), and its shares - lifted on Wednesday by a positive note from JP Morgan Cazenove - have edged up 1p to 116p.
But Philip Dorgan at Panmure Gordon repeated his sell advice, and his call for Argos to close some of its stores:
The period reported has been short and is low volume. The figures are poor, but not unexpected. Argos may benefit from the demise of Game, but there are plenty of other retailers competing for the same business.
We note that the new managing director of Argos [John Walden] held a series of interviews with the press last month, in which he said that he had been given a blank piece of paper. We think that he needs to start writing a list of store closures on it. While it may be true that Argos has few stores that don't make a contribution to overhead, this does not mean that this will perpetuate in an online world, with both Tesco and Amazon continuing to invest substantially.
We remain sellers with a target price of 60p.
David Jeary at Investec also has a sell recommendation:
The good news from the fourth quarter update is that there is no change to the 2012 pretax profit outlook, and that the year-end net cash position will be around £40m better than previously flagged.
The less good news is that Argos has seen no improvement in its like-for-like run rate, and that the debate around cyclical pressures versus structural decline is set to continue. The next sentiment driver in our view will come when the market hears the plans of newly appointed Argos managing director, possibly at the May preliminary results.
