Digital revamp pays off for Argos

Catalogue chain Argos returned to profits growth after an "encouraging" year in which more than half its sales were generated online.

A digital push at the high street business helped Argos deliver a 6% increase in underlying operating profits to £100.3 million, in sharp contrast to the near 60% plunge the previous year, after its first rise in like-for-like sales for five years.%VIRTUAL-SkimlinksPromo%
Online and mobile sales accounted for more than half of all revenues at the 737-strong chain during the year to March 2, helped by its click and collect service, while the group said it was on track to launch the first full digital catalogue before Christmas.

Parent firm Home Retail Group, which also owns Homebase, saw overall underlying pre-tax profits drop 10% to £91 million after a tougher year at the DIY chain, which was left nursing a 52% tumble in earnings to £11 million.

The group pledged to continue investing in its transformation plan at Argos and Homebase recovery efforts despite expectations for another challenging year for retailers.

Home Retail chief executive Terry Duddy said the year ahead will remain similar with consumer spending continuing to be "impacted by ongoing inflationary pressures and low levels of consumer confidence".

Strong demand for tablet computers saw like-for-like sales increase 2.1% across the 737 store Argos chain, with online and mobile sales now accounting for 51% of all revenues, up from 48% a year earlier. More customers chose to reserve products online to pick up in store, accounting for 31% of all revenues, while smartphone sales now represent 10% of trade.

Confirmation of the turnaround success at Argos helped Home Retail shares lift 2%, but analysts questioned if the revival can be maintained.

Retail experts at N+1 Singer said while self-help measures "cannot be ignored", Argos was also being boosted by short-term factors, such as the collapse of competitor Comet and the recent surge in the tablet market. They added: "We remain cautious on the longer term outlook for the business, believing that management's targets feel too optimistic."

But the City is expecting the wider Home Retail business to grow profits for the first time since 2008 over the new financial year, forecasting underlying earnings of £100 million.

High Street casualties
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Digital revamp pays off for Argos

Administrators sounded the death knell for Woolworths in December 2008, leading to store closures that left 27,000 people out of work. Since its collapse former Woolworths stores have become a blight in many town centres and more than 100 of the large stores still lay vacant in January 2012.

Loyal customers didn't have go without the family favourite store for long however as it reappeared online as in 2009, after Shop Direct Home Shopping bought out the Woolworths name.

The greetings cards specialist became the latest highstreet casualty in May with 8,000 jobs on the line when it was forced it into administration. Its biggest supplier, American Greetings, then bought Clintons out of administration and put the retailer through a rebrand including a new logo and complete in-store revamps.

Its contemporary format includes new fixtures and fittings and easier to navigate stores, and will be rolled out to all 400 UK stores at the cost of £16million. Bosses aim to bring the brand back to profit within two years.

Poor sales in the run up to Christmas was the final nail in the coffin for several struggling chains, including lingerie retailer La Senza, which went bust in January 2012 with 146 shops and 2,600 staff. Kuwaiti retailer Alshaya bought part of the business, which saved 60 shops and 1,000 staff.

La Senza has been struggling in a similar way to other specialist shops such as Game and Mothercare, which have been hit by cut-price competition at supermarkets and have no alternative products to help shoulder losses.

Stricken retailer Blacks Leisure, which employed 3,600 staff across 98 Blacks stores and 208 Millets stores, went into administration in Janurary 2012 after failing to find an outright buyer.

Soon after its stores were bought by sportswear firm JD Sports in pre-pack deal - an insolvency procedure which sees a company being sold immediately after it has entered administration – which saw most of Blacks' £36 million of debt wiped out.

Fashion chain Bonmarche, which was part of the Peacock Group, was sold in January when the group collapsed due to unsustainable debts, resulting in 1,400 job losses and 160 store closures. Private equity firm Sun European Partners bought 230 stores, which continue to trade with 2,400 staff.

Peacocks collapsed under a £740 million net debt mountain in January 2012 in the biggest retail failure since Woolworths. Despite being sold out of administration to Edinburgh Woollen Mill in a deal that saved 380 stores and 6,000 jobs, administrators from KPMG were forced to close 224 stores with immediate effect. This lead to 3,350 redundancies from stores and Peacocks head office in Cardiff.

The high street name continues trading as bosses work to stabilise the situation, yet a further blow was dealt this month with news that the firm's pension fund is in £15.8 million shortfall as a result of the collapse.

Game buckled under its £85m debt pile in March 2012 and was placed into administration after being unable to pay a £21m rent bill. Administrator PwC immediately closed 277 shops, with the loss of 2,000 jobs. Soon after, investment firm, OpCapita bought 333 Game stores, saving more than 3,000 jobs.

Game's demise followed a string of profit warnings and the failure of nervous suppliers, including leading names Electronic Arts and Nintendo, to go on providing the latest games, further damaging poor sales.


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