Argos Overhaul Could See 75 Stores Shut

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Argos has said it will close 75 stores in the UK over the next five years as it unveils a transformation plan for the business.

The retailer's parent company, Home Retail Group (Other OTC: HMRLF.PK - news) , made the announcement as it reported a 37% fall in group pre-tax profit to £18m in the six months to the start of September.

Argos made only £3.3m during the period.

Home Retail said it had reviewed Argos' 739 stores on the basis of several factors, including profitability and attractiveness of location.

"As a result, it is likely that Argos will close or relocate at least 75 stores as their leases come to an end over the next five years," the company said in a statement.

A review of the business highlighted a "clear opportunity" to invest more in digital technologies, Home Retail Group's boss said.

It will also reduce the circulation of the traditional Argos catalogue, which was launched in 1973. 

"The transformation plan aims to deliver growth by repositioning Argos as a digitally-led business from a catalogue-led business, leading the market growth of digital commerce through online, mobile and tablet, and offering customers more products with the fastest, most convenient fulfilment options," chief executive Terry Duddy said.

"This plan provides the right approach for Argos to achieve a long-term sustainable performance and profit recovery.” 

The company said it was aiming for £4.5bn of sales for Argos by 2018 and would invest £100m a year in the business over the next three years to achieve this.

Home Retail Group's shares rose more than 8% in morning trading following the announcement.

But Neil Saunders from retail analysts Conlumino said a big question mark remains over the sustainability of Argos’ business model.

"On the surface, its review looks sensible and has credibility," he said.

"However, executing the strategy will not be easy and there are a number of challenges Argos will need to address."

He said the company will have to create a superior digital experience for consumers, make sure it remains high in shoppers' minds, and has a unique edge to its product mix.

It came on the day Sky sources said Ford (NYSE: F - news) was planning to close its Southampton factory as part of its restructuring in Europe (Chicago Options: ^REURUSD - news) - in another damaging sign about the state of the economy.

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