Stephen Foley: Disappointing Argos must take care of itself


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?

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?