Home Retail Group (UK)

Profile subscribers click here for full profile

Home Retail Group (HRG) was until 2016 the UK's biggest home and general merchandise retailer, controlling two major chainstore brands. Argos is the country's biggest general merchandise retailer, and the market leader in sectors including toys, furniture, housewares, small domestic appliances and jewellery. It is also unique in Britain as a retailer with an extensive network of high street stores where customers select their orders from an instore catalogue rather than from on-shelf displays. Partner brand Homebase is the country's #2 home improvement and garden centre behind B&Q. The group was one of several created from the break-up of retail and credit services conglomerate GUS. Combined sales broke the £6bn level for the first time during 2010, before slipping back the following year and remaining there. In 2011, the group acquired ownership of the celebrated Habitat brand. However the break-up of HRG took place during 2016. The group accepted an offer from Australia's Wesfarmers at the beginning of the year for Homebase, and subsequently agreed to sell Argos (and the Habitat furniture brand in the UK) to Sainsbury's. (Wesfarmers' purchase of Homebase proved disastrous and the business was eventually sold on to turnaround specialist Hilco in 2018).

Argos was originally set up in 1973 by Richard Tompkins, then owner of the Green Shield Trading Stamp Company. Inspired by a trip to the US, Tompkins established an American-style trading stamps company in 1958 under the Green Shield name. An early version of modern loyalty marketing schemes such as AirMiles or Nectar, customers earned trading stamps when they bought goods in ordinary retail outlets. These stamps could be collected and then exchanged for gifts at specialised Green Shield Stamps catalogue stores owned by Tompkins. The scheme was a huge success, especially with shoppers, and at its peak more than 36,000 British stores had signed up to the scheme. 

However many larger retailers were unhappy about trading stamps because the scheme forced them to maintain higher prices in order to fund their purchase of stamps to pass on to their customers. An unwritten agreement among the larger grocery chains not to enter the scheme held until 1963 when Fine Fare announced plans to sign up to Green Shield. Some other grocers followed suit, sparking off a bitter war between stamp supporters and non-supporters in 1963 and 1964. Eventually, Sainsbury's, the most vocal opponent of trading stamps, launched a public campaign against the scheme and signed up other multiple chains including Boots, John Lewis, Marks & Spencer, WH Smith to join its anti-stamp Distributive Trades Alliance. Manufacturers too, including Cadbury, Imperial Tobacco and the Distillers Company, joined the alliance, boycotting stores which continued to issue stamps. 

Trading stamps were still widely used by small retailers as well as some larger chains, notably Tesco, but as a result of their exclusion from "better" stores, they were increasingly perceived as low-class. In the early 1970s, even Tesco pulled out of the scheme to fight off competition from another stamp-issuing supermarket, Kwiksave. By dropping stamps, Tesco found it could compete more effectively by offering discounts on price. As a result, Tompkins was faced with the dilemma of how to maintain his business. In 1973, he converted around 17 Green Shield stores were to a new brand, Argos, maintaining the low-cost catalogue concept and warehousing system, but exchanging goods for cash rather than stamps. The new brand gradually eclipsed its former parent, and in 1979 Tompkins sold it to diversified tobacco company BAT Industries for £35m.

Unlike most of the other businesses within BAT's non-tobacco portfolio, Argos prospered over the following decade, expanding its range of products and the size of its stores. Profits leapt from around £5m a year in 1979 to almost £60m by 1988. To deter a break-up bid from corporate raider James Goldsmith, BAT spun off the business as an independent company in 1990. However, Argos fared poorly as a standalone, hampered by the economic downturn as well as an ineffective management team. In 1998 it was targeted by mail order giant GUS, which launched a £1.9bn hostile bid for the business. The synergies between badly run Argos and GUS's substantial mail order catalogue businesses seemed huge, but the bid only just succeeded, and GUS was slow to integrate Argos with its other catalogues. In effect the process only began to take place in mid-1999, over a year after the deal was completed. 

However by then the GUS mail order business was beginning to suffer. The company claimed that sales had been hit by customers defecting to discount retail chains or cutting their expenditure. In summer 1999, to reflect lower demand, Argos's product lines were reduced by almost a fifth to 7,300 items. GUS began a complete overhaul of the rest of its business over the following years, steadily disposing of its heritage mail order lines in favour of traditional  retail-oriented businesses. (See GUS profile for more). As it did so, however, it began building the Argos range once again, increasing stocks once more to 13,000 items in 2002. Also that year, GUS acquired a second retail chain, Homebase from Sainsbury's. 

Homebase had been launched in 1981 as a home and garden sideline to Sainsbury's main supermarket business, initially as a joint venture with Belgian group Bon Marche. In 1995, the group added to the format by purchasing the stores of rival DIY chain Texas Homecare, then the UK #2, from Ladbroke for £290m. A year later, Sainsbury's bought out its Belgian partner. However, by then, Sainsbury's main supermarket operations had come under intense pressure from rivals, notably Tesco. Homebase was sold to its management team in 2001, before being acquired by GUS a year later. The combined retail division of GUS was spun out as an independent company in 2006 under the name Home Retail Group.

Last full revision 10th April 2016


All rights reserved © Mind Advertising Ltd 1998-2019