HOME RETAIL, Britain’s biggest household goods retailer, said it will reinvent its troubled Argos business for the digital age, targeting a 15 per cent rise in sales by 2018.
Shares in the group rose 6 per cent after it said it would reposition the 739-store Argos operation from a catalogue-led business to a digitally-led business.
It will focus on online, mobile and tablet transactions to attract more shoppers and reverse a sharp decline in profit.
“The plan will reinvent Argos as a digital retail leader,” chief executive Terry Duddy told reporters yesterday, after the group reported a 37 per cent slump in first-half profit.
Many British retailers have been under pressure as consumers are squeezed by higher prices, muted wage growth and government austerity measures designed to cut record national debt.
Argos has been particularly hard hit because its mainly low-income customers have suffered most and because it faces intense competition from specialist stores, supermarket chains such as Tesco and online retailers such as Amazon.
Home Retail’s five-year plan for Argos, which follows a six month strategic review led by the division’s new managing director John Walden, is targeting £4.5 billion of sales by 2018, up from the £3.9 billion made in 2011-2012, as well as mid single-digit operating margins.
The firm would invest £100 million a year in Argos over the next three years to achieve this, mainly on IT infrastructure, raising group capital investment to £525 million over the period.
Exceptional costs will total £50 million.
As part of the plan the group will likely close or relocate at least 75 Argos stores as their leases expire over the next five years.
The group said that by 2018 about 75 per cent of Argos’s store estate will be on lease terms of five years or less, providing it with the flexibility to respond to market changes.
The company declined to specify the likely impact of the plan to its Irish operations.
“We don’t think that the business review of Argos has found a magic bullet,” said Panmure Gordon analyst Philip Dorgan. - (Reuters)
