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Group growth strategy

The Group has a clear agenda to deliver long-term growth. We will leverage our purchasing scale, retail brands and multi-channel approach to grow market share in key growth categories within the general merchandise market.

Growth through leveraging purchasing scale

• Building upon market-leading positions by enhancing and developing the product range and offering in core areas
• Using shared scale and expertise in sourcing and logistics and joint product ranges to provide value for money and wider choice.

Purchasing scale continues to be leveraged with particular benefit from the Group-wide overseas buying operations. Buying directly from overseas has grown to 31% of Group sales, of which 18%, or over £1bn, is directly sourced from manufacturers, with the balance being purchased via overseas agents. Over 7,500 product lines are sourced directly via our overseas buying offices, and these are spread across the majority of the Group’s product categories. While cost pressures may build, such as from raw material prices or from foreign exchange rates, this will impact the market generally and Home Retail Group will utilise its substantial scale, skills and direct control over its supply chain to continue to extend advantage over its competitors and provide further benefit to its customers.

A continuing programme is driving wider cost synergies across the combined Group. Areas of focus include corporate procurement, media buying, IT services and property management. There has also been increased focus on the distribution infrastructure across the Group. Examples of benefits include combined fleet purchasing, shared backhaul (vehicles returning from store deliveries with collections from nearby suppliers) and relocating certain Argos Direct outbases to other Group facilities.

Growth through increasing market share in targeted large product markets

• Capitalising upon the strength of our retail brands to identify opportunities in product markets, particularly large, fragmented markets
• Utilising the inherent flexibility of the Argos and Homebase retail formats
• Using shared infrastructure efficiently to make products available to customers quickly and easily.

The Group has become the number two in the growth market of consumer electronics, with Argos clearly demonstrating the strength of its customer offer with excellent sales in areas such as video games systems, LCD TVs and ‘satnav’. ‘Big ticket’ categories such as furniture and white goods are likely to exhibit more difficult conditions due to the weakening in the housing market and general consumer confidence; however, the Group will capitalise on the combined buying scale, a market-leading home delivery infrastructure, new product presentations and its in-house financial services operation to continue to drive market share growth. Homebase also expects to continue its market share progress in kitchens, and Argos in the sports and leisure market.

At the same time as targeting share growth in ‘big ticket’ categories, emphasis will still be placed on maintaining strong positions in ‘smaller ticket’ categories. Such categories remain key to the overall performance of the Group, given that in both businesses average basket values are approximately £20 to £30.