Argos was a bad buy – but Sainsbury’s doesn’t need to sell at a silly price | Nils Pratley
The thinking behind Sainsbury’s £1bn-plus purchase of Argos back in 2016 wasn’t entirely other-worldly,The big idea was that, by putting Argos general merchandise shops within Sainsbury’s supermarkets, both chains would benefit via a customer crossover effect,But the problem was also screamingly obvious: why volunteer to step in front of Amazon’s non-food steamroller?Simon Roberts became chief executive of Sainsbury’s in 2020, replacing Mike Coupe, the architect of the Argos deal, and immediately indicated where he stood,His “food first” strategy wasn’t quite a declaration that he viewed Argos as inessential to the day job of competing with Tesco et al, but it wasn’t far off,Thus nobody was surprised by Sainsbury’s confirmation on Saturday that it was considering an approach for Argos from JD.
com, the enormous Chinese retailer,The identity of the would-be buyer was logical – JD,com publicly flirted with the idea of bidding for electrical chain Curry’s last year and is still thought to be keen on a splashy entry into the UK,Sunday, however, brought news that the talks were off already because, said Sainsbury’s, JD,com would only engage on “materially revised terms and commitments”.
In negotiation-speak, that’s like calling the other side a bunch of time-wasters,The talks look properly dead,Everybody knows Argos isn’t worth what it was in 2016, but it’s still a substantial business,There is still a possible upside to the messy weekend saga for those Sainsbury’s investors who view Argos as unwanted baggage,The mere fact of talks suggests Argos has not become so enmeshed in Sainsbury’s infrastructure that the business could never be separated and sold.
Of the 664 Argos shops, 461 are within a Sainsbury’s store, so a divorce would still be tricky.But more and more of Argos’s trade is going online, so perhaps there is still somebody out there who would want the 200-odd rump stand-alone shops, allowing Sainsbury’s to take back its store space to put to better use.Sainsbury’s doesn’t reveal Argos’s profits, but the detail-free charts it occasionally publishes suggest margins are slim (certainly slimmer than in the supermarkets) and have been getting slimmer in recent years.On the other hand, turnover at Argos is almost £5bn and digitalisation has happened, so perhaps there is still an appeal for somebody.For Roberts, Argos is best viewed as a low-level headache.
Its presence is annoying for shareholders who would prefer a pure grocery-only story, especially now Sainsbury’s has sold most of its bank.But the core supermarket business isn’t obviously being distracted – and the weekend update confirmed this year’s expectations on operating profit and cashflow, which helped the share price.The worry is more the medium-term one that, one day, the demand on Argos to stand on its own feet internally will become impossible to maintain.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionIt would have been better if Argos had never been bought in the first place because the competitive pressure in non-food is relentless.But it is still fair to turn down offers at silly prices.
Roberts has a couple of years to find an alternative – either a self-help fix of Argos or a sale on respectable terms.The task is not easy, but nor should it be impossible.
Who were the key figures at the ‘unite the kingdom’ rally in London?
Britain witnessed one of the largest far-right demonstrations in recent memory on Saturday in London.Organised by Stephen Yaxley-Lennon, better known as Tommy Robinson, the “unite the kingdom” protest was attended by between 110,000 and 150,000 people, exceeding the estimates of organisers, while about 5,000 “anti-racism” campaigners mounted a counter-protest.Here we take a look at the key figures at the rally.Stephen Yaxley-Lennon, 42, most commonly known as Tommy Robinson, is a British far-right activist who “organised” the “unite the kingdom” march in London on 13 September.After losing his job as an engineering apprentice for assaulting a police officer, Robinson moved into activism in 2009 by founding the English Defence League (EDL), an Islamophobic organisation forged on the football terraces in Luton before spreading nationally
Police search for 11 violent disorder suspects after ‘unite the kingdom’ march
Police are looking for 11 people suspected to have committed violent disorder offences after the large far-right-led march through London on Saturday, and said they had already charged eight people with offences.The “unite the kingdom” march was led by the far-right activist known as Tommy Robinson and attracted more than 110,000 people, police said, in excess of what they or the organisers expected.A counter protest of about 5,000 people also took place and police at times came under attack mainly from the people in the main march.The Metropolitan police said 26 officers were injured and they made 24 arrests on the day.All bar one of the 11 people police are seeking are believed to have been on the march, the largest far-right demonstration in recent times
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Danny Kruger takes Reform back to full strength – so who’ll be next to quit? | John Crace
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MP Danny Kruger says Tory party ‘is over’ as he defects to Reform
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Argos was a bad buy – but Sainsbury’s doesn’t need to sell at a silly price | Nils Pratley
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