Argos closes 75 stores as new boss announces digital makeover

Retailer Argos is to get a digital overhaul that will see its catalogue take a back seat and at least 75 stores closed or relocated over the next five years (Reuters)

The Argos catalogue is to get a digital makeover in an attempt by the struggling high street chain to reverse two years of falling sales.

It will launch a new digital catalogue by Christmas while the circulation of the print version will be cut as part of an internet push that will also see at least 75 stores closed or relocated over the next five years.

Parent company Home Retail Group hopes to grow Argos sales from £3.9 billion to £4.5 billion a year in 2018 in an "ambitious but achievable" overhaul that comes after a period of declining sales.

Argos boss John Walden, who was appointed earlier this year to revitalise the business, said it was unlikely the hard-copy catalogue would be axed altogether, with around 85% of customers having seen it before they buy.

But he admitted the book, which was first launched in 1973, may decline "precipitously" as sales shift online.

The group is also resisting pressure for widespread shop closures, saying it would keep stores "at the centre of what we do".

It stressed that having a "strong local presence" remained important.

The news comes after a six-month review of Argos to revive the business.

In half-year results also announced today, Home Retail said underlying earnings at Argos were 3% down at £3.3 million although it saw a return to like-for-like sales growth, up 0.6% in the six months to September 1.

Home Retail wants to broaden the appeal of its Argos chain to a wider customer base, but keep the focus on families.

It plans to trim its 739-strong store estate and move shops onto shorter leases to be able to relocate as part of a plan to use stores as pick-up points for online orders.

Stores will be kitted out with internet access and Wi-Fi, with a fast-track collection service and customer service for orders.

The group will also focus on fewer and "more powerful" brands, such as children's toy range Chad Valley and Habitat - the homewares chain Home Retail bought last year.

Argos will begin trials in January to determine the future format and numbers of the catalogue, testing a smaller version that directs customers online for the latest prices and the full range.

The group prints between 16 and 17 million copies of the catalogue twice a year, which are collected by customers in store.

It has already reduced catalogue numbers by around 18% over the past two years.

There was a mixed response from analysts, with Philip Dorgan at Panmure Gordon saying the revamp was no "magic bullet".

Analysts at Singer Capital Markets said they believe "a more radical shake-up is needed", but added: "Today's news on future strategy is positive, given that management have finally acknowledged change is required to evolve the Argos model and concept."

Home Retail shares rose 5% as interim results came in at the top end of City expectations, despite group-wide underlying pre-tax profits falling 37% to £18 million.

But trading was tough for its 340-strong DIY and gardening chain Homebase, which saw half-year like-for-like sales fall 6.2% after being hit by the wash-out summer weather.

Underlying earnings at Homebase fell 18% to £24.5 million.

PA