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'End of the road' for the Argos catalogue

The Argos catalogue has been a mainstay of coffee tables in British family homes for almost 40 years, but it could now be facing the end of the road.

Home Retail Group, owner of Argos, plans to cut circulation of the catalogue and scrap the laminated versions used by customers to order products in its stores.

Argos introduced the catalogue in 1973 and it quickly became a mainstay of British families in the run-up to Christmas as they hunted for presents. At its peak, 20m versions of the biannual catalogue were printed. But Home Retail now wants to shift investment into digital technology in the face of fierce competition from online retailers and supermarkets. Although the catalogue will still exist, investment and the volume printed will be cut and it will reduced to a “supporting role”.

Terry Duddy, chief executive of Home Retail, said: “In the last 10 years, this is the biggest thing we have done.”

The changes will lead to visible restructuring within Argos shops, including the end of its unique order, pay and collect queuing systems.

The company plans to introduce web-based browsers and wi-fi so that customers can use their smartphones to order and pay for products instead of using the catalogue.

Argos will also close 50 stores and relocate another 25 as leases expire over the next five years. This will leave the retailer with around 700 stores, 100 of which will be distinguished as a larger “showroom” format and the remainder as collection sites for order. The overhaul has been led by John Walden, an American who was hired as the chain’s managing director in February, despite never working in the UK before.

He said: “We have a lot of affinity with the catalogue. We don’t have to lose that because technology has changed. It can be preserved in a modern format.”

Mr Walden described the plan as “ambitious but achievable”. The five-year plan involves spending £100m in each of the next three years and increasing sales to £4.5bn by 2018. At present, Argos’s sales are roughly £3.4bn.

Argos aims to attract more affluent customers and introduce more exclusive brands. However, Mr Walden denied the retailer is going upmarket and taking on John Lewis. He said: “We are not going upmarket. We are taking our broad appeal today and making it more universal by filling in a few gaps.”

The stock market gave the proposals a lukewarm backing, with Home Retail shares rising 1.6, or 1.54pc, to 105.70p.

Bethany Hocking, an analyst at Investec, said: “This sounds very sensible, but we think the market will have hoped for a more ambitious plan.”

Alongside the review of Argos, Home Retail, which also owns Homebase, reported a 1pc fall in sales to £2.5bn

in the half-year to September 1. This included a 0.6pc rise in like-for-like sales for Argos, a sharp improvement on the 9.1pc decline reported last year.

Pre-tax profits for the company rose from £29.4m to £51.1m. However, this included a £35m credit after Home Retail closed its final-salary pension scheme.

Source : Graham Ruddick – The Telegraph

25 October 2012
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