Operational Review 

Argos 

 

1999
£m

1998
£m

Sales

1,812

-

Trading Profit

116.0

-

Proportion of Group Trading Profit

21%

-

Net Assets

245.9

-

Background

Argos is the UK’s leading catalogue retailer, trading through 448 stores including twelve stores in the Republic of Ireland. This represents an increase of 13 stores in the year. The Argos brand continues to focus its offer around the traditional core strengths of value, choice, quality and convenience. With 18 or 19 million catalogues distributed every six months, the Argos catalogue is the primary vehicle for promotion of the Company’s products and services, achieving unparalleled penetration into approximately 60% of UK households.

Argos Logo

Trading

Argos sales for the eleven months since acquisition (27 April 1998) rose by 2.5% to £1,812 million. New store growth accounted for 3.5% of the rise; like for like sales declined by 1.0% as a result of weakening consumer spending. Trading profit for the same period fell from £123m to £116m, reflecting the weakening in consumer spending in the second half of the year. Against this background, Argos maintained its position as the UK’s largest retailer of small electricals and toys. Gross margins were flat. Improved productivity levels in the stores and savings in Argos’ central costs offset an increase in the Argos cost base.

Argos Catalogue
Argos catalogue: Spring/Summer 1999

Improvements in the last year

With the aim of improving customer service and shopping convenience, a number of successful developments have been initiated this year:

  • "Stock Checkers" have been installed alongside catalogue browsers in stores to allow customers to check stock availability prior to purchase and a "Ring and Reserve" system has been actively promoted to encourage customers to make enquiries and reserve stock from home.

  • A queue management system has been installed into 25 Superstores during the year. This tells customers when their orders are ready for collection.

    Queue management system
    Queue management demonstrated in an enhanced store environment

  • A home shopping trial was launched and promoted in the Granada TV region. This service enables customers to order and pay for goods over the telephone for delivery to their home.

    Stock Checker
    Stock Checker - saving time for the customer

  • A test took place of a separate 84 page catalogue called "Argos Interiors" containing a wide range of soft home furnishings, with delivery to home or store.

New Developments

The following new initiatives will be launched over the coming months and are designed to deliver profitable sales growth and facilitate operational improvements:

  • In August, Argos will replace the current Traditional and Superstore catalogues with a new single catalogue format containing approximately 7,300 product lines. From August, customers who shop at the 343 Traditional stores will therefore have over 30% of additional lines to choose from, while careful product selection in the new catalogue should minimise sales losses in the 86 Superstores. This change is expected to drive growth in sales and to reduce annual catalogue costs.

  • Following the successful trial, the home shopping service will be rolled out nationally in August 1999 under the ‘Argos Direct’ name. The service will provide customers with the ability to order any product from the catalogue for delivery to a location of their choice.

  • A 700 page fashion catalogue titled "Argos Additions" will be launched in August 1999, initially through 27 Superstores. We believe that Argos customers will respond positively to a competitively priced catalogue from Argos offering clothing, footwear and home textiles with a credit account facility.

  • This Autumn, Argos will be launching its own interactive TV shopping service on "Open", the digital TV channel run by British Interactive Broadcasting, making us one of the first high street retailers to bring this service to the market. In addition, we will be significantly enhancing the Argos web site at argos.co.uk making more products available to customers, supported by the new home shopping delivery infrastructure.

  • Argos is also undertaking a major programme of staff training to focus clearly on friendly and efficient customer service in store.

    Customer Service
    Friendly and efficient customer service in-store.

  • Capital investment is being made in enhancing the stores’ infrastructure, in particular through an extensive refurbishment programme and the replacement of all electronic point of sale equipment over the next two years.

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