Stephen Foley: Disappointing Argos must take care of itself
Thursday 21 April 2011
Outlook With sales sliding at an annual rate of 5.6 per cent, and profits down for the third year in a row, Argos looks less like a business suffering the recessional blues, and more like a business in trouble.
It is just the kind of retailer that should be picking up sales during these tough times, as shoppers trade down to cheaper alternatives, yet its failure to capitalise has been disappointing. In short order, it could become costly for investors who rely on HMG's dividend, since that now looks in grave danger of being cut next year.
Mr Duddy is going to manage Argos on a day-to-day basis, now that Sara Weller is stepping down for health reasons. The search for a permanent replacement provides an opportunity here, to find someone willing to conduct a more radical shake-up.
There is little doubt over what is presently ailing Argos. It is that pesky internet creature again, luring shoppers out of their high street habits.
And the increasing concentration of our spending into big box supermarkets is hardly a trend that has played out yet. In the face of these factors, traditional chains need to be slimming down their store portfolios, and those thatget ahead of this curve seem setto get the best results for their shareholders.
Argos, however, continues marching into these headwinds. With over 750 stores nationwide already, it has added six more in the past year.
It refurbished 150 stores and plans to do 200 more in the current year, at £100,000 a pop. The 2.5 per cent uplift it gets in sales from the average refurburbishment mitigates but does not reverse the downward trend in like-for-like sales.
Argos need not be afraid of the future, since it has established itself with a powerful internet brand and is about to start dabbling in TV, too, with its own home shopping channel on Sky.
The company is trying to make a case that the internet and stores complement each other, and that 28 per cent out of the 36 per cent of Argos sales which originate online are fulfilled by shoppers coming to the store to collect their purchases, rather than throughhome delivery.
Some of these purchases might disappear if customers had to drive a little further to their nearest store, perhaps, but as the stores themselves produce thinner and thinner operating profits, the argument for trimming the portfolio gets stronger.
Investors tend to focus their arguments about HRG on the question of whether the management might decide to split the company apart, with Homebase and Argos going solo.
But breaking up, as Neil Sedaka told us, is hard to do, Especially if one half is so manifestly going in the wrong direction. Better to get the house in order first.
HRG need not wait for matters to slide towards the crisis of a dividend cut before addressing its strategic problems. But will it?
- 1 Isis 'jihadi bride' claims forced sex with Yazidi girls is never rape because Koran condones it
- 2 New Zealand 'the best country to work as a prostitute', says sex worker advocacy group
- 3 Purity balls: Girls in the US making virginity pledges as fathers vow to 'protect purity'
- 4 Mother 'will allow son's circumcision in return for release from prison'
- 5 Female Muay Thai champion hustles coaches to give them a beating
Greek hospitals cannot afford painkillers, scissors or sheets as budget cuts bite
Purity balls: Girls in the US making virginity pledges as fathers vow to 'protect purity'
Female Muay Thai champion hustles coaches to give them a beating
Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
Picture of couple posing with beached dolphin 'that later died' causes outrage
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...