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| Argos refocuses as 'digital-led retailer' | Argos refocuses as 'digital-led retailer' |
| (about 1 hour later) | |
| Struggling retailer Argos is attempting to drag itself into the 21st century by giving the business a digital overhaul that will diminish the importance of its traditional catalogue and lead to at least 75 store closures or relocations. | Struggling retailer Argos is attempting to drag itself into the 21st century by giving the business a digital overhaul that will diminish the importance of its traditional catalogue and lead to at least 75 store closures or relocations. |
| Its parent company Home Retail Group said it would reduce the circulation of the Argos catalogue, which was launched in 1973 and currently has a biannual print-run of around 17m copies, as it refocuses the chain as a "digital-led retailer". However, it insisted that "print marketing will always be important to us". | Its parent company Home Retail Group said it would reduce the circulation of the Argos catalogue, which was launched in 1973 and currently has a biannual print-run of around 17m copies, as it refocuses the chain as a "digital-led retailer". However, it insisted that "print marketing will always be important to us". |
| Home Retail's chief executive, Terry Duddy, admitted that the company needed to "invest to restore Argos to growth" as he said that the company would spend £100m a year for the next three years to implement a five-year, four-part turnaround plan. The strategy involves focusing Argos on digital channels, providing faster availability of wider product ranges, supplementing its existing customer base by attracting more affluent consumers with new product lines, and cutting costs. | |
| The company also confirmed plans to close or relocate 75 stores in its 739-strong estate and move shops into shorter leases. Originally 50 stores had been expected to shut. | The company also confirmed plans to close or relocate 75 stores in its 739-strong estate and move shops into shorter leases. Originally 50 stores had been expected to shut. |
| John Walden, the new Argos boss who has developed the plan, said: "We make a lot of money from our stores and they generate a lot of cash. When you have stores that generate cash you can invest in the business and at the same time as any leases expire [change those terms]. It is a very fortunate position to be in." The company added that just seven stores currently lose money, although on average each store makes just £86 a week. | |
| The new Argos strategy comes after a six-month review of the chain to revive the flagging business. | The new Argos strategy comes after a six-month review of the chain to revive the flagging business. |
| In half-year results announced with the new plan, Home Retail – which also includes Homebase – said underlying earnings at Argos were 3% down at £3.3m with a return to like-for-like sales growth, up 0.6% in the six months to 1 September. | In half-year results announced with the new plan, Home Retail – which also includes Homebase – said underlying earnings at Argos were 3% down at £3.3m with a return to like-for-like sales growth, up 0.6% in the six months to 1 September. |
| In total Home Retail announced pre-tax profit of £18m, which was down 37% but a big improvement on the analysts' consensus forecast of £12.2m. Sales fell by 1% to £2.53bn. | In total Home Retail announced pre-tax profit of £18m, which was down 37% but a big improvement on the analysts' consensus forecast of £12.2m. Sales fell by 1% to £2.53bn. |
| The shares, which initially spiked in early trading on news of the better-than-expected profits, swiftly returned to where they started the morning at around 105p as analysts wondered if the new Argos strategy would be enough. | The shares, which initially spiked in early trading on news of the better-than-expected profits, swiftly returned to where they started the morning at around 105p as analysts wondered if the new Argos strategy would be enough. |
| Philip Dorgan, a retail analyst at Panmure, wrote to clients: "Home Retail has reported another big fall in interim profits and we don't think that the business review of Argos has found a magic bullet. That said, these numbers are a beat, the interim dividend has been restored and the targets set for sales and margin at Argos are likely to increase optimism that value can be created. We are therefore increasing our target price from 51p to 80p, but we are retaining our 'sell', because we seldom see sales and margin targets attained in retailing and we think that Argos is a difficult fix." | Philip Dorgan, a retail analyst at Panmure, wrote to clients: "Home Retail has reported another big fall in interim profits and we don't think that the business review of Argos has found a magic bullet. That said, these numbers are a beat, the interim dividend has been restored and the targets set for sales and margin at Argos are likely to increase optimism that value can be created. We are therefore increasing our target price from 51p to 80p, but we are retaining our 'sell', because we seldom see sales and margin targets attained in retailing and we think that Argos is a difficult fix." |