Holding Court outside the UK: The Investment Column

Courts' relentless success as an international retailer explains its lofty rating. While the likes of Laura Ashley and even Marks & Spencer have struggled in expanding outside the UK, Courts, with its cheap sofas, refrigerators and carpets, has, perhaps surprisingly, gone down a storm in far-off places such as South-east Asia, the Pacific and the Caribbean, which together make up more than 80 per cent of profits. Meanwhile Courts has managed to maintain respectable growth in the tougher UK market.

Its success overseas - sales grew 25 per cent to pounds 272m despite an pounds 18m hit from currency movements - reflects a number of factors.

First, Third World economies are growing fast and a one-stop shop for kitting out houses which also offers credit is both rare and attractive. Courts also benefits from centralised purchasing, which means it can buy white goods from the US and electricals from Japan in bulk at vastly reduced prices. Courts' plans to expand in still largely untapped areas such as Indonesia look promising.

Though the UK is a stickier market, Courts has done well with like-for- like sales a healthy 24 per cent ahead and profits up by over a half to pounds 7.8m. The driver was interest-free credit and Courts' superstore format.

Though only 40 of the group's 90 UK shops are superstores, at over three times the size of the high street format and with family-friendly features such as children's play areas, they generate more than 80 per cent of UK sales.

Plans to push deeper into the North of England, opening eight to 10 stores each year for the next few years, makes sense, with scope particularly for leveraging advertising costs.

Meanwhile, building society windfalls, the housing market recovery and expansion into fast-growing Southern Ireland should pay off. NatWest forecasts pounds 32.5m, putting the shares, up 2.5p to 572.5p, on a deserved forward p/e ratio of 20. Hold on.

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