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Argos looks for multichannel growth in China

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Argos is to open for business in China next year in search of growth, its owner the Home Retail Group announced today. The news comes as the group today announced first-half profits down by more than 70%, with sales down as UK consumers come under ever-increasing economic pressure.

Home Retail Group has teamed up with Chinese home appliance manufacturer the Haier Group to launch an Argos-branded multichannel operation in the Shanghai area next year.

In the long-term it’s expected the joint venture, 49% owned by Argos owner the Home Retail Group and 51% by Haier, will expand its multichannel offer across China’s regions. Argos brings the multichannel expertise while Haier brings its distribution infrastructure.

The new business will be headed by a Home Retail Group-appointed chief executive and is expected to cost the Home Retail Group £22m in investment towards a total cost of £45m, with the first £10m payable next year.

Terry Duddy, chief executive of Home Retail Group, said today: “We are delighted to announce the launch of this international expansion for the Argos brand. Having cooperated with Haier over the last 18 months we are very excited by the opportunity that the combination of our expertise and Haier’s capabilities and scale provide to take advantage of the growth potential in China.”

Yunjie Zhou, chief executive of Haier Electronics Group, said: “We are very excited to be able to leverage the expertise in multichannel, general merchandise retailing that Home Retail Group has developed.

“With the retail market in China growing strongly over the last few years, we believe that this new business will be well placed to benefit from its continued growth.”

This news means international expansion in search of hoped-for growth for a company that is currently challenged in its core UK market. It came as Home Retail Group unveiled disappointing first-half results. In the 26 weeks to August 27, the company saw sales fall by 6% to £2.6bn, while benchmark pre-tax profits fell 70% to £28m and bottom-line pre-tax profits by 71% to £29.4m from £103.0m. The company said its core Argos customers were “under greater pressure,” with sales particularly poor in consumer electronics. Sales at Argos fell by 7.7% to £1.67bn from £1.81bn at the same time last year, while Homebase sales were down by 1.8% at £839.6m from £855.3m last time.

Duddy said: “As we now enter our busiest trading period market conditions remain both weak and volatile, and in these early weeks of the second half we have not seen the improvement in sales that we had anticipated.

“We are well-positioned operationally and we will continue to shape the future of shopping for our customers, ensuring we bring unrivalled convenience and value to customers’ every day lives, whether shopping at home or on the move.”

New developments in the first half, beyond the China launch, included the launch of Argos TV shopping channel and the acquisition of the Habitat brand, which will sell within dedicated areas in sister company Homebase’s stores. Internet sales continued to rise at both companies, supported by its Check & Reserve service.

Picture: pmorgan

Published under creative commons licence.

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