Can Argos push Home Retail back into growth mode?

After a tough couple of years, Argos owner is finally showing signs of reviving its fortunes, with sales up for the first time in five years.

by Michael Northcott
Last Updated: 04 Sep 2013

Bosses at Argos can breathe a sigh of relief today, after the chain’s like-for-like sales grew 2.1% in the year to March. That’s the first growth the company has seen in five years, and the firm is putting it largely down to growth in its online and mobile app sales, as well as the growing popularity of tablets.

Unfortunately, this newfound sales growth has merely slowed the decline in parent company Home Retail’s profits. It is struggling with a poorly performing Homebase, where profits fell from £23m to £11m in the full year. Group profits were down 10% to £91m – a far cry from the £433m that the company raked in back in 2008.

Nonetheless, Home Retail’s chief executive Terry Duddy sounded positive. He said: ‘Argos delivered like-for-like sales growth for the first time in five years and multi-channel sales broke through the 50% threshold. Our strong financial position enables Argos to deliver on its transformation plan to become a digital retail leader.’

It’s true that Home Retail has recently been taking steps to convert Argos into a digitally led retailer, ditching its traditional catalogue model. It has been investing heavily in its online offering, and getting to the 50%-through-other-channels mark sounds like a strong start to us. Other plans to tighten up the operation include moving its stores onto shorter leases so that it can jump around different locations more easily. In the near term the firm plans to close 10 stores, and no new premises will be opened. 

The Argos model works principally by maximising the old ‘sales per square foot’ measure – warehouses crammed full of products instead of airy-fairy ‘customer spaces’. So if the chain can lower the cost of its premises and squeeze yet more juice out of its online operation – and it seems to have made a good start – then that sales growth stands a chance of continuing. 

Now all that needs to be done is to sort out that pesky Homebase business. Quick sell-off, anyone?

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