The announcement significantly weakens the hand of Argos whose acting chief executive Stuart Rose has only been on board for less than three weeks. He has barely had a chance to familiarise himself with the company before the publication of its defence document yesterday.
"It will be a concern to shareholders," one analyst said. "The market's perception of Argos over the years has been based on the two-man team of Mike Smith and Bob Stewart. The defence makes much of the success in the past but if neither of those two are going to be there that starts to look quite shaky."
The announcement about Mr Stewart was buried on Page 26, subsection 3 (b) of the defence document, and said conversations about his retirement took place late last year. This was before the GUS bid and before it emerged that Mr Smith was too ill to carry on as chief executive.
Argos denied that Mr Stewart , 53, might have been forced out after a clash of personalities with Mr Rose. It said Mr Stewart was going of his own volition after 16 years on the board.
Mr Stewart was paid pounds 200,000 last year but this will be increased to pounds 360,000 from the beginning of April in order to enable a higher pension payment. He will also be paid a one-off bonus of pounds 196,000. He will stay in his post until at least the end of June, the likely period of the bid.
Argos denied that the developments would damage its chances of survival. "It has no significance for the bid and when we have fought off this unwelcome offer we shall recruit a first class finance director," it said.
The news on Mr Stewart overshadowed the Argos defence which failed to offer figures on current trading or on the possibility of a return of funds to shareholders. Alongside results which showed a 9 per cent drop in profits to pounds 128m, it repeated its view that GUS was trying to get Argos on the cheap. It promised a review of costs and the product range which Mr Rose said did not offer enough choice on prices. The catalogue would become "more modern" and the stores made more welcoming.
GUS, which is offering 570p per share for Argos, dismissed the defence and criticised its "nostalgic" reference to its track record: "It merely confirms our view that Argos is a mature format that has run out of steam," said Lord Wolfson, GUS chairman. Argos shares fell 6p to 605p. GUS shares closed 9p higher at 796p.