While group profits were flat at pounds 555m, before exceptional items, Burberry's profits collapsed from pounds 62m to pounds 24.9m due mostly to the impact of the Asian crisis, the strong pound and a crackdown on sales to the grey market. The result was a 43p fall in the share price to 807p.
Management now admits it had allowed Burberry to become over-reliant on Asia. There have also been design mistakes, with Burberry drifting towards a rather staid look which has left it with piles of unsold stock that has had to be written off . This is ironic, given that Lord Wolfson's profits warning at Next a few months ago was due to the retailer becoming too trendy. GUS will now restrict licences in Asia and move its design centre from London's East End, which it considers too distant from the capital's creative West End hub.
GUS's saviour last year was Experian, the burgeoning data and information division. Now boosted by last year's D-Tech deal and the more recent Metromail acquisition, this increasingly looks like the real engine of growth at GUS and now accounts for 27 per cent of group profits.
UK home shopping remains uninspiring though the sales decline of recent years has been corrected. Home shopping sales rose by 10.7 per cent in the second half with agency sales up a creditable 7 per cent
With Argos predicted to be earnings-neutral this year after a first half hit, the outlook is encouraging. On reduced full-year earnings forecasts of pounds 565m, GUS trades on a forward multiple of 20. Not cheap but a quality stock worth holding.Reuse content