Sainsbury’s to sell Argos to three retail veterans in £120m deal

Sainsbury’s has agreed to sell the Argos retail chain for £120m 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 £1bn. 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 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.” Pennycook brings a long career in grocery retail to Argos. He has been credited with bringing Morrisons back from the financial brink after its takeover of Safeway led to a collapse in profits and the first loss in the company’s history. Pennycook joined as financial director in 2005, tasked with picking up the pieces from the botched integration, but was twice passed over for the top job and left in 2013. He then stepped in to lead the Co-op Group after its banking arm’s financial problems were compounded by a tabloid sting that revealed drug use by the bank’s former chair Paul Flowers. Here Pennycook was also praised for rebuilding the company. Sainsbury’s bought Argos as part of the Home Retail Group – along with its other brands including Habitat – in early 2016 in a £1.3bn 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 2020. Sainsbury’s held discussions with a Chinese potential buyer for Argos last year but those talks collapsed. The deal with Swift is expected to be completed in early 2027 and the businesses are likely to be fully separate by early 2029. 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 660 shops across the UK, about two-thirds of which are in Sainsbury’s stores, and has more than 1,100 collection points. Sainsbury’s shares rose by over 3% 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.” Clive Black, a retail analyst 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 said 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”.