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Home Retail Group sets out Argos strategy and Christmas trading in light of potential Homebase sale

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Home Retail Group today set out its planned strategy, both online and offline, for Argos in the light of the news that it may sell Homebase .

The group responded overnight to speculation about the bid from Sainsbury’s for Argos by announcing that it was in advanced talks with Wesfarmers to sell Homebase for £340m. The move, it said, would leave it free to concentrate on Argos and its digital transformation plan.

Today it outlined the steps it had taken forward in the Argos transformation plan, while also reporting on Christmas and Black Friday sales across the group. Argos is an IRUKTop500 Elite retailer, while Homebase is a Leading retailer.

Christmas and Black Friday sales

Argos took a new approach to Black Friday this year, with efforts to spread the weight of spending across several weekends rather than one Cyber weekend. As well as offering discounts over Black Friday weekend, it also ran a series of Red, White and Blue weekends. At the same time it warned on profits, saying that Black Friday was too unpredictable to call.

Today it reported a “mixed” performance for Argos in a “challenging” market. Total sales of £1.8bn in the 18 weeks to January 2 were up by 0.9% compared to the same time last year, while like-for-like sales, which strip out the effect of store openings and closures, were down by 2.2%. Its new digital format stores contributed 3.1% to growth.

In the 44 weeks to the year to January 2, total sales of £3.6bn are down by 0.3%, and by 2.8%, like-for-like.

Parent company Home Retail Group chief executive John Walden said Argos sales were “affected by volatile trading patterns resulting from particularly strong sales during Black Friday week, a shift in consumer demand from both the weeks before and after Black Friday, growth in digital transactions, reduced store footfall particularly on the high streets, and the continuing effects of price deflation.”

Argos introduced its new Fast Track same-day delivery service ahead of Christmas. The national service is built on the retailer’s hub and spoke distribution network. Today Walden said the service had driven “increases in digital sales, digital participation and home delivery.” He added: ” I continue to believe that the capabilities being developed in the Argos Transformation Plan will position Argos as a retail leader in an increasingly digital future.”

Meanwhile, Homebase reported total sales of £434m in the 18 week period, down 4% on last year but up by 5% on a like-for-like sales basis. Sales in the 44 weeks came in at £1.25bn, 5.4% up, like-for-like, but 2.8% down on a total basis as space in the retailer’s store network has fallen by more than 8%. So far, 31 stores have been closed, taking the store estate to 265 branches.

Walden said: “The Homebase Productivity Plan, which includes an aggressive store closure program, overhead reductions and customer proposition improvements, has begun to position Homebase as a smaller, higher quality and more efficient business.

:Yesterday we announced that we are in advanced discussions to sell Homebase, which would provide good value for shareholders and a growth opportunity for Homebase colleagues. The potential transaction would allow the Group to focus on Argos and its Transformation Plan, with an improved balance sheet and financial position.”

Argos transformation plan

In today’s trading update Home Retail Group set out its achievements so far in the Argos transformation plan, which is aimed at “reinventing Argos as a digital retail leader”. They include the development of a national hub and spoke network, enabling the same day delivery and collection through its FastTrack service of a core range of 20,000 products. Small format digital stores give access to the same speedy delivery, and Arog said today that it was now trialling collection through convenience stores that do not hold any Argos stock.

It pointed to success in building strong digital teams as the retailer has moved from being a catalogue retailer to a digital specialist, commenting: “Although the internet is now central to most businesses, the market has both broad variation in digital standards and a shortage of sufficient digital leadership capability.” Partnerships include that with eBay , enabling eBay shoppers to collect their online purchases in Argos branches. A consumer to consumer parcel drop off service is now being trialled.

Ranges have been expanded in an effort to make them “more universally appealing” while store-related costs have been reduced through the use of smaller stores and concessions and reductions in average lease times to below five years. “Argos has the flexibility to add, eliminate and relocate stores to minimise costs and meet previously unaddressed consumer demand,” it said.

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