Is this the end of the Argos catalogue? Struggling retailer to close 75 stores as it moves online
The traditional Argos catalogue looks set to die a slow death after the retailer unveiled a digital makeover that will also include the closure or relocation of least 75 stores.
Owner Home Retail plans to cut the circulation of the Argos catalogue - a popular household fixture since it was first launched back in 1973 - as it tries to reposition the struggling chain for a digital future.
The first digital Argos catalogue will be launched before Christmas, followed by trials starting in January to determine the future format and numbers of the printed version.
Household fixture: Print run of Argos catalogue will be cut as chain focuses on digital future
Argos boss John Walden, who was appointed earlier this year to revitalise the business, said it was unlikely the catalogue would be axed altogether, but admitted it may decline 'precipitously' as sales shift online.
He said it would be 'foolish' to pull it now, as around 85 per cent of customers look at the catalogue before they buy.
Argos also plans to trim its 739-strong store estate and move shops into shorter leases to make it easier to relocate them, as part of a plan to use shops as pick-up points for online orders.
But Walden said that the group would keep stores 'at the centre of what we do'.
Home Retail added: 'Stores and catalogues will remain important, but their roles will be adapted in order to support a digital offer.
The group has already reduced the number of catalogues it prints by around 18 per cent over the past two years to between 16 and 17million copies twice a year. These are collected by customers in store.
Home Retail said it wants to broaden the Argos customer base and would focus on fewer and 'more powerful' brands, such as children's toy range Chad Valley and Habitat - the homewares chain it bought last year.
Terry Duddy, chief executive of Home Retail, said it was an 'ambitious but achievable' overhaul for Argos, which has suffered poor trading as it lost out to online rivals in recent years.
In half-year results also announced today, Home Retail said underlying earnings at Argos were 3 per cent down at £3.3million, But there was a return to like-for-like sales growth, up 0.6 per cent in the six months to September 1.
Home Retail shares shed most of their early gains to trade up 0.5p at 104.6p by mid-morning as half-year results came in at the top end of City expectations, despite group-wide underlying pre-tax profits falling 37 per cent to £18million.
Trading was tough for the firm's 340-strong DIY and gardening chain Homebase, which saw half-year like-for-like sales fall 6.2 per cent after it was hit by the wash-out summer weather.
Underlying earnings at Homebase fell 18 per cent to £24.5million.
Income shares watch: Home Retail slashed its half-year dividend to 1p from 4.7p. The shares yield 4.3 per cent.
Choppy: Home Retail shares have struggled to make progress over the past year
View from the City
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: 'Hamstrung by store leasing agreements, management has opted for a middle ground approach. The Argos store base will be reduced, but importantly, over a period of time.
'Meanwhile, investment in order to become an online driven retailer (away from its current catalogue-led model) is being made. Furthermore, against dire expectations, profitability has surprised to the upside, with cost savings and favourable currency movements at Homebase proving a key factor.'
'For now, today’s update helps end a long period of strategy uncertainty. Improved trading at Argos has been seen, whilst ongoing efficiencies at Homebase have again been generated.
'Nonetheless, frustration that many of today’s initiatives might already have been implemented persists. In all, management continues to test investor faith. Doubts that Argos can compete with the likes of Amazon continue to fuel negative (sell) consensus analyst opinion.'
Analysts at Singer Capital Markets said they believe a more radical shake-up is needed, but added: 'Today's news on future strategy is positive, given that management have finally acknowledged change is required to evolve the Argos model and concept.'
Investec analyst Bethany Hocking said: 'The overall aim is to "reinvent Argos as a digital retail leader and reposition it from a catalogue-led business to a digitally-led one" – this sounds very sensible but we think the market will have hoped for a more ambitious plan.'
Most watched Money videos
- German car giant BMW has released the X2 and it has gone electric!
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Iconic Dodge Charger goes electric as company unveils its Daytona
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- Mini unveil an electrified version of their popular Countryman
- How to invest to beat tax raids and make more of your money
- MG unveils new MG3 - Britain's cheapest full-hybrid car
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- Paul McCartney's psychedelic Wings 1972 double-decker tour bus
- The new Volkswagen Passat - a long range PHEV that's only available as an estate
- CVC Capital Partners' float to hand private equity tycoon...
- Are you a backseat driver? The 20 telltale signs you're a...
- Footsie hits a record as Investors eye lower interest...
- Takeovers leave UK stock market facing 'death by a...
- Convicted rate-rigger Tom Hayes in fresh appeal as he...
- MARKET REPORT: Retailers lead the way on FTSE's historic day
- Bereaved families paid a record £7.5bn inheritance tax...
- THG sales accelerate amid strong demand for beauty products
- Petrol surpasses 150p a litre - cost of filling up is now...
- Electric Range Rover revealed during Arctic Circle...
- Royal Mail steps up defence in bid battle with 'Czech...
- AB Foods shares soar as Primark owner eyes 'significant...
- Grindr faces lawsuit over claims it shared HIV data with...
- FTC sues to block Coach owner Tapestry's $8.5bn takeover...
- Legal battle turns ugly at Revolution Beauty after former...
- JD Sports to buy US sportswear retailer Hibbett for £899m
- Thames Water customers face huge increase in bills
- Struggling Asda promises to cut £3.8bn debt pile