Consumers 'yet to turn the corner' for downbeat GUS

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The Independent Online

GUS issued a bleak prognosis for the first half of 2006 despite enjoying a better Christmas than many of its retail rivals.

The conglomerate, which is close to spinning off its financial services arm Experian, said it expected underlying sales to fall further in the coming months at its retail division.

Argos, the catalogue retailer, saw flat sales over the 14 weeks to 7 January. Its margin was also unchanged despite strong demand for lower-margin consumer electronics, because of its initiatives to take costs out of its supply chain. Homebase fared less well, with a 3 per cent drop in like-for-like sales during the period and a lower gross margin as the slump in do-it-yourself sales continued.

David Tyler, GUS's finance director, said: "We were surprised by the strength of consumer demand during December. But we are still relatively cautious for 2006. We may well get a continued decline in like-for-like sales." He added: "The consumer has not really turned the corner in terms of their ability to spend, given the level of indebtedness." Shares in the group fell 1 per cent to 993p.

The group's Experian arm, which has been on a massive acquisition spree before its anticipated sale or demerger, saw total sales rise 25 per cent over the previous year in the three months to the end of December. This was driven by a 40 per cent rise in North America, where it has bought a number of consumer-facing financial websites including the price-comparison portal

Mr Tyler said the company would reveal its plans for Experian and Argos Retail Group "once it had made them", declining to give an update yesterday. GUS demerged its remaining two-thirds stake in Burberry, the luxury goods group, last month.

The company also announced it would book a €25m (£17m) loss on its disposal of its Dutch home shopping business, Wehkamp, rather than a €35m profit as it had previously said. This followed a new Dutch law reducing the maximum interest rate that commercial lenders can charge consumers to 16 per cent from 21 per cent, which reduces Wehkamp's future profitability.