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Analysts urge new Argos boss to close stores

Last month, Argos’s new chief executive acknowledged that he may have to close some of the embattled retailer’s 700 shops.

For Philip Dorgan, an analyst at Panmure Gordon, those closures cannot come soon enough. On Wednesday, he slashed his profit forecasts for Home Retail Group, the parent of Argos, citing the “continued management inaction on store closures”.

Argos, which sells everything from toasters to toys, has suffered a drastic fall in sales, hit by competition from the internet and customers cutting back.

Home Retail’s chief executive had previously insisted that all stores made money and closing them half-way through their leases would be very expensive. But, John Walden, who last month joined as head of the Argos chain, appeared to take a different stand.

The American acknowledged in February that it seemed “crazy” to close stores if they are making money, but said he needed to have confidence they have a future role to play in a “multi-channel business”.

Mr Dorgan agreed. Pointing to interviews in which Mr Walden said he had been given a blank piece of paper on Argos, the analyst said: “We think that he needs to start writing a list of store closures on it.”

He added: “While it may be true that Argos has few stores that don’t make a contribution to overhead, this does not mean that this will perpetuate in an online world, with both Tesco and Amazon continuing to invest substantially.”

With no sign of an accelerated store closure programme, Mr Dorgan cut his pre-tax profit forecasts for next year and the following by 34pc and 45pc respectively. He retained his “sell” recommendation.

None the less, Home Retail – which also owns Homebase – ticked up 1.6 to 103.2p. Its stablemate, Kingfisher, was also on the ascendant thanks to hopes for its French business.

Upping its rating on Kingfisher, which owns B&Q, to “overweight”, Morgan Stanley addressed the question of whether the French consumer will “crack”.

While the broker acknowledged that economic storm clouds were building in France, it was reassured by suggestions that pressure on disposable incomes this year will be “modest”. Kingfisher added 2.9 to 277.4p.

Source: Rachel Cooper - The Telegraph

07 March 2012
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