Our strategy

Home Retail Group operates from a clear scale advantage, derived from a well-invested infrastructure which has been built up over a period of many years.

The Group's strong financial position enables us to deliver on our transformation plan to reinvent Argos as a digital retail leader and to invest in the rollout of the Homebase proposition. Our vision is to build successful businesses that bring unrivalled convenience and value to customers, whether shopping at home or on the move. In essence, we're shaping the future of shopping.

Our strategy is focused on the following pillars, which support our vision:

Digital leadership and accelerating multi-channel

Home Retail Group has been at the forefront of advances in technology that have brought about a fundamental and permanent shift in the way customers shop. Increasingly, they choose to shop online, or on the move through mobile devices, principally for pick-up in a local store but also for home delivery. This 'multi-channel' experience is core to what we do and is the reason why we have a relentless focus on developing further our highly successful internet and mobile commerce channels to meet customer demand. We will prioritise future investment into these multi-channel capabilities to satisfy customers in whichever way they wish to interact and shop with us, including the convenience of immediate product collection via our store networks.

Some examples:

Argos continues to grow its multi-channel sales penetration, representing £2.0bn or 51% of its sales, up from 48% a year earlier. Argos remains the second largest internet retailer in the UK, with over 635 million website and app visits during the year.
Mobile commerce continues to see a rapid rise in customer usage to represent 10% of Argos' total sales, up from 6% last year. Argos remains at the forefront of technological advancement, with development like the Apple iPhone and Andriod apps and the web platform for mobile devices exploiting this increasingly popular method of shopping.
Homebase's internet sales participation has grown by 16% and now represents 5% of its total sales, driven principally by Reserve & Collect. Homebase's refreshed website showcases its key brands, in particular the inclusion of Habitat, and it now has a transactional mobile website for home delivery items and store reservations.
The Group's store portfolio remains a critical part of our multi-channel offer, especially in Argos where nearly 90% of all sales continue to involve the store in some way.

^{Unless otherwise stated, the above figures relate to our
2012/13 financial year, ending 2 March 2013.}

Product leadership and exclusive brands

We use the strength of our retail brands to drive leadership in our core markets through expanding our product ranges. With over 67,000 products across Argos and Homebase, we are always looking for opportunities to offer new products and services.

During the year, Argos expanded its range of own brands with a further 700 lines included in the Spring/Summer 2013 catalogue. Furthermore, Argos has extended its range of tablet computers to capture market share and enhanced its conveience credentials through its in-store white goods offer.

Homebase's exclusive brand strategy, together with its differentiated proposition, has driven market share gains for the fourth consecutive year. Habitat products are now available in over 200 Homebase stores and Homebase's market-leading installation services across kitchen, bathroom and bedroom furniture ranges continue to achieve a customer recommendation rate in excess of 90%.

What this means:

Argos' suite of 35 exclusive or own-brands continue to extend choice and offer great value to customers with an increase of around 700 lines in the Spring/Summer catalogue compared to last year from its Alba, Bush, Chad Valley, Hygena, Schreiber and Habitat ranges.
Argos has further enhanced its convenience credentials with an increased range of white goods available for in-store collection, following last year's successful trial, allowing customers to pick up a range of white goods from around 450 larger stores.
A key differentiator for Homebase is its strong portfolio of exclusive brands such as Habitat, Laura Ashley, Qualcast, Odina and Schreiber. During the year, Homebase accelerated this strategy with Habitat and Laura Ashley concessions and the extension of the Qualcast brand into hand tools and watering products.
Habitat products are now available in over 200 Homebase stores, including ranges in furniture, paint, wallpaper and tiling. Habitat gives the Homebase customer greater choice with premium quality, contemporary styling and some iconic designs that have been best sellers for many years.

^{Unless otherwise stated, the above figures relate to our
2012/13 financial year, ending 2 March 2013.}

Compelling customer offering

We continue to ensure that customers continue to receive excellent service and choice by maximising our buying scale and sourcing capabilities, particularly via direct import and direct sourcing of products.

Some examples:

Argos has maintained its commitment to being highly price competitive through the use of weekly price comparisons, ensuring its price position is better than the competition on its highest sales volume lines. This is enhanced through 'WOW' offers and the Argos Value range. Social networks also present a good opportunity to engage with our customer base via Facebook or Twitter.
Homebase continues to use a range of promotions to drive customer loyalty with its Nectar customer base exceeding seven million active customers. Direct mail packs are also sent to customers to increase brand engagement and social media intervention via the Homebase Facebook app has seen Homebase posts viewed over 3.2million times in the year.

^{Unless otherwise stated, the above figures relate to our
2012/13 financial year, ending 2 March 2013.}

Continued cost management

The Group has a strong track record of delivering significant organisational and infrastructure changes which improve the flexibility of our businesses and reduce costs, while maintaining or improving operational standards.

What this means:

We have more than offset cost inflation of approximately £125m over the last four years with cost savings of approximately £267m, achieving a reported cost reduction of £142m over the same four year period. These cost reductions have been achieved through a rationalisation of our distribtion network, store-based management restructuring programmes, headcount reductions in central office and numerous other cost initiatives, together with a lower level of unit volumes.
We will continue to review and challenge our cost base to ensure we maintain our low-cost operating model.

Financial strength

The Group has strong cash flow characteristics with £396m of net cash as at 2 March 2013 (up from £194m the pregious year). In addition, we have a £165m committed borrowing facility which is undrawn and which expires in March 2016.

What this means:

Our strong financial position enables us to deliver on our transformation plan to reinvent Argos as a digital retail leader and to invest in the rollout of the Homebase proposition, and as a result, ensure that we are well positioned for economic recovery.