Stephen Foley: Argos is in crisis. When will its management admit it?

Outlook If only it was just a publicity stunt: "Argos announces joint venture in China, in vain attempt to distract from its profits wipeout in the UK."

Sadly, management really will be putting time, effort and millions of pounds of shareholders' money into cracking, or trying to crack, the world's most alluring emerging market. All of which means less time, effort and money to focus on the large and urgent problems here at home.

It is six months already since Argos lost its managing director, and Terry Duddy, chief executive of the parent company Home Retail Group (HRG) took over day-to-day control. The company has been travelling headlong towards crisis all this while. These have been six months in which it should have been reassessing its strategy, and at the very least starting to consolidate its 750 stores. Investors who watched their shareholding plunge another 15 per cent yesterday will rue the fact that these six months have been wasted.

This is hardly an unforeseen crisis, though the scale of the decline in sales on show in yesterday's results was more awful even than many had feared. Its consumer electronics business is in freefall, down 20 per cent on last year, and there will be no let-up in competition from internet-only retailers such as Amazon on the one hand, and ever-expanding supermarkets on the other. Consumer habits are changing and, with inflation and the recession biting, they are changing ever more quickly. The UK high street is over-supplied with retail chains and retail outlets.

China – which, as the salivating Mr Duddy pointed out, has a retail market worth £750 billion and growing at 8 per cent a year, dontcha-know – could be transformational for Argos, but while it has picked a decent joint venture partner in the appliance maker Haier Electronics it is unclear why the Chinese should take to the Argos brand over any of the other Western names fighting to get noticed. Long-suffering HRG shareholders will note that Argos made a similar plan to take India four years ago, without success.

HRG must cut the dividend and reinvest the proceeds in a store closure programme for Argos. The company hinted it is finally open to such a thing by pointing out 185 of its stores have their leases up for renewal or have lease break clauses in the next five years.

Shareholders are overdue for something a little stronger than hints.