Terry Duddy leaves Home Retail Group with mixed record.
Terry Duddy to leave HRG
I’m a retail Analyst at Verdict, analysing the Furniture & Floorcoverings and DIY & Gardening sectors. My very...
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Terry Duddy, the Home Retail Group (HRG) chief executive, has announced his intention to step down by the group’s 2014 AGM. Duddy has performed well as chief executive, adjusting Argos’s and Homebase’s proposition to be more relevant, with the group one of the first major retailers to harness multichannel, and steering it through an exceptionally challenging period. His legacy is tainted though by his decision to continue opening stores in the face of tough conditions and weak like-for-likes.
During his seven-year tenure as chief executive of HRG, UK and Ireland sales at Argos grew by 1.0% and declined by 8.4% in Homebase. This is a robust performance considering that customers have deferred making larger, discretionary purchases. Its sales performance is put into context by the shrinking of the electricals market by 9.7% between 2006 and 2012, and the DIY & gardening market contracting by 13.9%. The collapses of Focus DIY, Jessops and Comet further reiterate how well it has done to outperform over this period.
While sales at Homebase have contracted sharply, it should reap the rewards of adjusting its offer to improve its appeal among women and the more affluent as the housing market recovers. Its decision to acquire the Habitat brand has helped it gain further traction, with figures from Verdict’s How Britain Shops report showing that visitor share, main user share, conversion and loyalty among AB shoppers are all noticeably up. Its refurbishment programme and growth through its Odina and Schreiber kitchen brands during its 2013/14 year should continue to drive this performance.
Duddy also helped Argos to become one of the largest multichannel retailers, with its share of multichannel sales up by 19 percentage points since 2006/07 to 51% at the end of the 2012/13 financial year. Its Check & Reserve offer has driven growth, with its share of total sales 21.8 percentage points higher. This offer has gained greater resonance with a more time-poor customer who wants to shop more efficiently to maximise their leisure time, and has helped drive footfall to its stores.
However, Duddy’s decision to keep opening stores during the downturn should be questioned. This new space supported its performance over the last seven financial years, when improving like-for-like performance should have been more of a focus. Like-for-like sales were negative in four and six of the past seven financial years for Argos and Homebase, respectively, and in years when they fell, Argos opened a net of 45 stores, with Homebase’s portfolio increasing by 35.
While retailers with such extensive networks have spent the last few years closing stores, Argos has remained resolute, closing stores only when leases expire, as Duddy has claimed that all its stores were profitable. This may be the case, but HRG never really succeeded in developing its abundance of space to create a desirable instore experience. As more of the purchasing journey has been conducted away from the store, on laptops, tablets and smartphones, less space has been needed for piles of catalogues and rows of kiosks, and a greater percentage of customers’ time instore is spent waiting for purchases. Argos continues to do little to engage with customers during this window of opportunity, and so, despite its multichannel investments, appears a rather dated retailer.
With the company currently reinventing itself as a “digital leader,” it may be a good time to bring someone else in with a fresh approach. John Walden, current CEO of Argos, looks the most likely candidate to be able to deliver this.