General merchandise retailer Argos is set to close at least 75 stores over the next five years as it undergoes a digital overhaul in a bid to modernise its proposition, it has been announced today.
Over the last six months, the retailer has undertaken a comprehensive business review in order to return it to sustainable growth and as such will move away from its traditional catalogue-led model and look to position itself as a “digital retail leader”.
Comprising four main elements, the digitally-led business aims to provide greater product choice, develop a universally appealing customer offer, operate a more flexible cost base and reposition its channels for “a digital future”.
A three-year investment programme underpins Argos‘ five-year plan and the retailer is targeting £4.5 billion of sales by the end of its financial year in 2018, following an investment of around £300 million over the next three financial years.
Argos owner Home Retail Group (HRG), which also owns home & DIY retailer Homebase, announced in its half year results today that Argos‘ multichannel sales penetration grew to represent 51 per cent of total sales in the 26 weeks to September 1st 2012, highlighting the strength of its online operations.
Argos is the second most visited internet retailer in the UK, reporting over 440 million site visits over the last 12 months and its m-commerce channel now accounts for seven per cent of total sales.
The retailer recently announced that its use of Bazaarvoice‘s Conversations, a social platform for consumer-generated content, has seen 79 million users engage in conversations about the brand online.
During the half period, Argos‘s benchmark operating profit declined by three per cent to £3.3 million though like-for-likes rose 0.6 per cent and HRG CEO Terry Duddy believes the retailer is in a strong position moving forward.
“Against a challenging consumer backdrop, Argos has had a solid first half of the year supported by its multi-channel performance, with sales growth driven most notably by an improvement in consumer electronics,” he said.
“During the first half of the year we took additional action to control costs, tightly managed our working capital and delivered a strong cash performance which has strengthened the Group‘s financial position.
“Market conditions remain fragile and hence we will continue to plan cautiously, however we are in good operational shape as we approach our peak trading period.
“Argos‘ 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.
“This plan provides the right approach for Argos to achieve a long-term sustainable performance and profit recovery.”
Overall, HRG‘s group sales fell one per cent to £2.53 million and benchmark operating profit decreased by 29 per cent to £19 million.