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Argos looking to better-off shoppers to revive fortunes

Argos is making an aggressive pitch for better-off customers and winding down its traditional catalogue sales as part of a £300m bid to revive the struggling retailer's fortunes.

Terry Duddy, chief executive of Argos owners Home Retail Group, is battling to turn around the ubiquitous high street chain, which has been squeezed by fierce competition from online behemoth Amazon and the big supermarkets.

He is looking to extend the appeal of the store beyond less affluent Argos customers – suffering worst amid recession and high inflation – by getting higher earners to shop more often and push sales to £4.5bn by 2018.

Mr Duddy hopes to achieve the goal with a bigger push on e-readers and tablets as well as middle-class brands like Habitat.

He said: "We think there's an opportunity for consumers from upper demographics to shop with us a bit more often." The firm will also close or relocate 75 of its 736 stores.

The urgency of the overhaul was underlined by operating profits of just £3.3m on sales of £1.69bn in the six months to September.

Mr Duddy said the retailer was moving to keep pace with fast-changing shopping habits: "Things have moved so rapidly in the last three years. Our iPhone app accounts for 7 per cent of sales and we expect this to be 10 per cent by the end of the year."

Shares in the Home Retail Group added 1.6p to close at 105.7p but are still down on the year. Home Retail, which also owns DIY chain Homebase, posted pre-tax profits of £18m. This was 37 per cent down on last year but well above the City's much bleaker forecasts of £12.2m.

Details of the turnaround plans failed to convince many City analysts. Freddie George, from Seymour Pierce, said: "There is little in the current strategy that, in our view, will arrest the current decline."

Home Retail Group's results show that Argos effectively makes just 20p for every £100 spent but same-store sales grew 0.6 per cent.