Argos enlists Littlewoods
Thursday 26 March 1998
The group announced a new retailing strategy and a home shopping joint venture with Littlewoods as part of its fight against the hostile pounds 1.6bn bid from Great Universal Stores.
It is to spend up to pounds 5m on a modernising programme that will see its stores upgraded with better racking and improved window displays while its old fashioned catalogue will be made more modern and user-friendly. More higher-value products will be added to improve customer choice though the company said it would not compromise on its commitment to low prices.
Stuart Rose, who has only been Argos chief executive for six weeks, admitted that Argos had to become a little more fashionable. "It has been one step behind customers in fashion rather than half a step ahead." The shops will start to stock "impulse" ranges such as greeting cards, wrapping paper, and videos in an attempt to grab more revenue from existing customers.
Mr Rose pledged to improve the margins by 1 percentage point over two years by improving the sales mix, adding more own-label and exclusive ranges which carry higher mark-ups and by increasing the level of direct sourcing.
The strategy statement came as the company released a trading update which showed that same-store sales had improved with a 4.8 per cent increase in the 12 weeks to 12 March. Margins were up by 0.5 percentage points in the same period.
The group's second defence document, which is expected to include the return of cash to shareholders, will be published next week if the GUS bid is cleared by the Office of Fair Trading. The Takeover Panel yesterday extended the offer timetable, saying Argos will now have two days following the OFT's decision to release its last information.
Argos's joint venture agreement with Littlewoods will see the pair launch a fashion home shopping catalogue aimed at Argos customers. The 700-page catalogue will consist of branded clothing and be tested later this year. A national roll-out is planned for autumn 1999. Littlewoods will produce the catalogue and handle the orders, while Argos will provide its customer database.
The joint venture's costs were described as "minimal" by Mr Rose, who said expected losses in the first year could be around pounds 2m each. The company will use the database to target higher-spending customers. A home delivery service will be rolled out nationally next year at a cost of pounds 15m.
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