GUS blames falling clothes sales for third profits warning

GREAT UNIVERSAL Stores, Britain's largest home shopping company, issued its third profits warning in three years yesterday blaming falling sales of clothing through its major catalogues.

GUS shares fell 20 per cent to 340.5p, their lowest level since early 1993, as analysts cut their full year profit forecasts. Several expressed concerns about the future of the group's declining "big book" catalogue business.

Sales at GUS home shopping division, which includes the Kays catalogue, fell by 7 per cent in the six months to September as shoppers defected to cheaper high street rivals like Matalan and New Look. Profits at the division sank by 70 per cent to just pounds 14.5m due to other issues such as rising bad debts and distribution problems. "These are all signs of a business in disarray," one analyst said.

Analysts were also unconvinced by the recovery plan outlined by Lord Wolfson, GUS' chairman, and his apparent dismissal of City fears. "What was alarming was the sense of contempt for investors and analyst concerns," one said. "He skimmed over the presentation and didn't treat questions with the respect they deserved."

The comments came as GUS reported a 12 per cent fall in half year pre- tax profits to pounds 176m, if exceptional charges are excluded. But current trading is worse with GUS's home shopping business struggling against a weak retail market which is being hit by pre-Christmas discounting.

GUS said the tough trading conditions meant it would not meet market expectations of pounds 500m pre-tax profit for the full year. Analysts have downgraded to pounds 420m-pounds 450m instead.

Lord Wolfson admitted that GUS's catalogue prices had been too high. He said the catalogue's historic attraction of easy access to credit for cash-strapped shoppers had been eroded by the increasing availability of credit cards. "Our price levels are not as attractive as they should be," he said.

Lord Wolfson said GUS' prices would need to come down by around 10 per cent and that costs would have to cut. "Home shopping might need to operate profitably at a lower level of sales," he said.

GUS is also hoping to balance falling sales in its traditional agency business with higher sales through Argos Additions, a new catalogue being introduced in the Argos stores which were acquired via a pounds 1.9bn hostile takeover 18 months ago. Prices in these catalogues have been "unbundled" to strip out the credit offer and are up to 25 per cent cheaper.

GUS claimed it was now in a position to take advantage of e-commerce opportunities. It has registered the domain name bringme.com as a possible prelude to offering third party distribution services to Internet retailers.

Lord Wolfson admitted that GUS "probably has been a bit slow to recognise these opportunities". Analysts said that the new chief executive, John Peace, who takes the position in January, will have his work cut out to restore shareholder value. Mr Peace said there were no current plans to de-merge the Experian financial information business before 2001 when it would have a three-year trading record.

GUS also said it had no current plans to sell its Burberry luxury goods business which is still recovering from the impact of the Asian crisis.

GUS group sales rose by 4 per cent to pounds 2.5bn at the half year stage. Experian increased profits by 15 per cent to pounds 95m. Argos profits rose 8 per cent to pounds 31m.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Arts and Entertainment
World Book Day
News
people
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United player ratings
Life and Style
love + sex
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot