Home Retail Group: What the analysts say

Philip Dorgan, Panmure

“We believe Argos will need a significant store closure programme, as it shifts towards ‘clicks’ rather than ‘bricks’. To be clear, we think that a store base can be an advantage in an online world, we just don’t think that Argos needs 750 of them on a five year view.

“There are bigger structural issues for Home Retail to overcome.  We think that it needs to be much more radical if it is to survive in an online world.”

Matthew McEachran, Singer

“There are few surprises in today’s results although the final dividend has been passed completely whereas we had expected a token payment. There is no news on current trading but management indicate that prospects for the year ahead remain uncertain given ongoing inflationary pressures and low levels of consumer confidence and therefore they continue to plan cautiously.

“We remain cautious on Home Retail given cost pressures and the group’s exposure to the UK mass market customer.”

David Jeary, Investec

“We remain negative, given our fears that Argos is suffering from structural pressures, which will be difficult to offset – especially in the absence of a consumer recovery.”

Independent analyst Nick Bubb

“The interest was in what Home Retail did about the final dividend and in what they said about the future of the huge Argos store portfolio. Well, there is no final dividend at all, which is pretty brutal, given managements’ previous utterances on the subject (before the January warning) and the big year-end net cash position.

“We said yesterday that Argos managing director John Walden would be lynched by a mob of angry analysts if he doesn’t admit to the need to close stores, but, unwisely, there is little mention of the subject in the statement.”

Conlumino, Matt Piner

“We have seen with other large mature retailers in recent years that, once financial performance starts to deteriorate, it becomes more difficult to make the investments and improvements needed to put things back on track, and that it can quickly turn into a vicious cycle of cutting costs and falling sales.

“Home Retail Group believes that its current woes are very much a reflection of the economy, but with this unlikely to show any major improvement any time soon, it needs to have a Plan B.”

Seymour Pierce, Freddie George

“We remain concerned that the decline in profits is structural and set to continue. The new chief executive at Argos, John Walden, will, we believe, have to adopt a restructuring programme reducing the number of stores, which could impact the company’s currently strong balance sheet and the support provided by the sum of the parts valuations.”