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Retailers retreat as traders see red

High street chains were in the doldrums as another wave of selling engulfed equities, fuelling the benchmark index’s biggest sell-off since November 2008.

Home Retail Group was among those on the wane as analysts at Seymour Pierce turned bearish on the owner of Argos and Homebase, arguing that a “strategic shake up [is] needed” in the face of economic pressures and a move to internet shopping.

Back in June, Home Retail said that fearful shoppers had dramatically cut purchases of electrical goods, adding to concerns of a fresh downturn in consumer spending.

That was on the minds of Seymour Pierce analysts, who said: “It is hard to see core categories such as electricals, which account for c.50pc of sales, or homewares and furniture making a decent contribution to earnings.”

The broker argued that these products have been adversely affected by factors such as competition from food retailers and specialist stores developing their multi-channel offering.

“It is hard to see a reversal of fortunes for the group over the medium term unless there is a restructuring of the Argos portfolio combined with a re-think on strategy,” said analysts.

With the balance sheet “becoming more stretched”, they believe that management will have to consider a possible closure of some of Argos’ 750 stores, a rethink of its product lines and a review of the twice-yearly catalogue model.

Seymour Pierce cut its stance to “hold” from “sell”, helping send Home Retail down 8½ to 124.7p.

Source : Rachel Cooper – The Telegraph

18 August 2011
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