Argos owner in 'brutal' payout cut

ArgosThe owner of catalogue retailer Argos has pulled the plug on its shareholder dividend after revealing a 60% plunge in annual profits.

Home Retail Group's decision to cut the payout - described as "pretty brutal" by one City analyst - triggered a further 12% slump in shares of the beleaguered retail chain, which also owns Homebase.

The board said trading conditions, which caused a 20% decline in the market for consumer electronics in the year, contributed to the removal of the full-year dividend as it looks to focus resources on its turnaround.

Profits for the group were £90.2 million in the year to February 25, which compares with £426 million in the 2008 financial year. Argos has dropped to £94.2 million from £376.2 million over the same period.

The results have fuelled speculation over whether Home Retail plans to cull any of its estate of 748 Argos shops and 341 Homebase outlets.

The chain has brought in consultants OC&C to help new managing director John Walden assess the Argos business but insisted that widespread store closures were not planned, given there were just seven loss-making Argos stores.

Philip Dorgan, an analyst at Panmure Gordon, said Home Retail needed to be "much more radical if it is to survive in an online world" and Argos would need a "significant store closure programme".

The group said around 230 Argos store leases were up for renewal in the next five years, meaning they could be relocated or closed, while 10 would close this year.

In a further shift of focus towards the internet, the group plans to launch a revamped Argos website ahead of Christmas.

It will also boost its product offering, with 24,000 lines available in its spring/summer catalogue and an additional 9,000 online-only products.

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