Sainsbury’s has agreed to sell the Argos retail chain for £۱۲۰m to allow it to concentrate on its core food business.
The supermarket announced on Friday it was selling the catalogue shopping business to a trio of retail veterans, a decade after buying the company for more than £۱bn.
Argos is being bought by Swift Partners, a new company established for the deal by Richard Pennycook – who used to run the Co-operative Group and turned around the Morrisons supermarket chain – along with another former Morrisons executive, Trevor Strain, and Matt Truman.
Simon Roberts, Sainsbury’s chief executive, said it would be “business as usual” for staff, customers and suppliers.
“For Sainsbury’s, this is a further step forward in our strategy. Having rebuilt the core strengths of our food business, this agreement allows us to focus all our resources and investment on the significant opportunities ahead,” Roberts said.
Pennycook from Swift Partners said: “We believe strongly in Argos’s future and see real opportunities to invest and build on its progress. Argos’s combination – of a strong digital business supported by standalone stores, stores inside Sainsbury’s and local fulfilment centres – gives it a distinctive position in the market and an excellent platform for growth.”
Sainsbury’s bought Argos as part of the Home Retail Group – along with its other brands including Habitat – in early ۲۰۱۶ in a £۱.۳bn deal, in an effort to create a combined food and non-food retailer to take on companies such as Amazon and John Lewis.
However, Britain’s second largest supermarket has struggled to live up to its ambitions given the tight margins the business operates on, at a time when consumers are watching their spending closely during the cost of living crisis. Roberts also announced an intention to concentrate on a “food first” strategy when he became the boss of the supermarket chain in ۲۰۲۰.
Sainsbury’s held discussions about selling Argos last year with a Chinese buyer, although these talks collapsed.
The deal with Swift is expected to be completed in early ۲۰۲۷, while the businesses are likely to be fully separate by early ۲۰۲۹.
Sainsbury’s said Argos would continue to trade in the normal way, with “long-term commercial agreements covering Argos stores in Sainsbury’s” as well as relating to its Nectar loyalty card programme. Habitat products will continue to be sold by Sainsbury’s and Argos under a long-term brand licensing arrangement.
Argos operates out of more than ۶۶۰ shops across the UK, about two-thirds of which are in Sainsbury’s stores, and has more than ۱,۱۰۰ collection points.
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Sainsbury’s shares rose by over ۳% on the news.
Roberts indicated he had been in talks with Swift for months and told reporters he was confident Argos now had the right owners, adding: ““We really do think this is a win-win. Each business will be able to build on its strengths.”
The retail analyst Clive Black at Sainsbury’s broker Shore Capital said he had always wondered whether Argos was “wholly aligned with and symmetrical to the market positioning of the Sainsbury grocery business”.
He added that Argos had been a “suboptimal performer from a financial perspective” and the process of selling it had been “challenging and prolonged”.
Bally Auluk, a national officer at the shopworkers’ union Usdaw, said it welcomed “the commitment to keeping the model of store in stores, standalone stores and local fulfilment centres” and called for any changes to be “handled fairly, transparently and in consultation with employees and their union representatives”.
