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Argos reveals switch on for TV Shopping

Argos yesterday unveiled plans to expand into television shopping, books and children's wear as it continues to battle against falling consumer confidence.
Parent company Home Retail Group (HRG) also revealed that Argos managing director Sara Weller will stand down in June for "personal reasons", with group chief executive Terry Duddy taking over her role until a permanent replacement is found.

Ramona Tipnis, an analyst at Shore Capital, said: "The past few years have been a challenge for Argos and Sara Weller has, in our opinion, done a good job in a difficult consumer environment. We would not expect to see a step change in strategy at this point."

News of Weller's departure came as HRG - which had previously slashed full-year forecasts - confirmed underlying pre-tax profits fell 13 per cent to £254.1 million in the year to 26 February, in line with analysts' predictions.

Duddy said the group, which also owns the Homebase chain, deserved to be reappraised after Tesco - the UK's biggest retailer - said on Tuesday that its general merchandise sales were under pressure.

He added: "If your best supermarket, which is supposed to be gaining market share against you, is actually performing slightly worse, you've got to get a reappraisal of the Argos performance."

HRG said it would continue its investment in preparation for an eventual consumer recovery, with capital spending edging up to about £150m in its current financial year from £143m in the previous 12 months.

Initiatives at Argos include launching a new home shopping TV channel in the summer, expanding into children's clothes and launching a trial with a third party to sell books, which could also be extended into other product categories.

The firm, the UK's second-biggest internet retailer, will also continue to invest in revamping stores and expanding its mobile shopping offering with new applications for Android mobile phones and the Apple iPad.

Some analysts remained sceptical over whether the investments would do much to offset the challenge Argos faces from online retailers such as Amazon and major supermarket groups.

Peel Hunt analyst John Stevenson said: "Incremental business is always good, but it doesn't address the core threat."

Annual sales at HRG dipped by 3 per cent to £5.85 billion.

While a string of British retailers have issued profit warnings in recent months, HRG has been particularly hard hit as its predominantly low income customers are suffering the most severe squeeze on their budgets.

Source : Peter Ranscombe - Business

21 April 2011
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