Argos poised for return to the clothing market

General merchandise giant Argos intends to stage a land-grab in the fashion market in a challenge to established clothing retailers.

The Home Retail-owned retailer’s initiative marks a return to a category that it has had no serious presence in since the disposal of its Additions brand as part of the sale of GUS Home Shopping to Littlewoods in 2003.

Argos chiefs believe its catalogue and online business model gives it an opportunity in fashion and have drawn inspiration from the success of Next’s Directory business and etail giant Asos.

Details of Argos’s fashion launch remain under wraps but the retailer has been attempting to woo staff from clothing retailers, including online specialists, and it is thought the intention is to include well-known brands in the offer.

Argos’s Additions brand launched in 1999 and was a 700-page catalogue, and it is thought another catalogue could be an option for the new venture.

An Argos spokeswoman said: “Argos is already present in some elements of the clothing market and is constantly evaluating opportunities for range expansion across all of its product areas.”

General retailers such as Asda with its George range have become powerful forces in fashion but Retail Week Knowledge Bank senior partner Robert Clark said Argos would need to approach the venture with caution.

He said: “It will be a big ask. It is very good on systems and distribution but fashion is a crowded field and requires different systems. The supermarkets are already big in it and are trying to get bigger.”

Verdict Research lead analyst Maureen Hinton said: “It appears a natural extension because it has the online business and click-and-collect, which are fast growing footwear and clothing channels.

“The main problem is going to be building up a credible brand - you tend to think of Argos for very functional purchases.”

Argos has been hit hard during the downturn but range extensions are a key part of its strategy and the internet has brought new opportunities. The retailer has been adding internet-only products to its offer, which customers can collect in stores. New categories such as health and beauty and children’s books are among those added for this year’s peak trading period.

On Wednesday Home Retail reported in its first-half update that Argos suffered a 32% fall in operating profits to £54.4m and sales fell 4% to £1.81bn. The decline - and the corresponding 23% drop in Home Retail’s profits - was in line with City expectations.

However, Home Retail chief executive Terry Duddy was confident that Argos’s unique business model had a long-term future.

The retailer has doubled the number of ‘wow deals’ across categories year-on-year to 750 as part of its determination to maintain its value positioning and its value range now accounts for 7% of sales volume.

Duddy maintained: “The latest performance at Argos has still seen market share held or gained in most product categories, which is encouraging given the prevailing conditions for customers.” Duddy said the retailer had planned “cautiously” for Christmas.