GUS defies forecasts with surge at Argos

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The Independent Online

GUS, the retail group that owns Argos and Homebase and most of Burberry, has defied City expectations of a weather-induced hiccup to report buoyant first-half sales.

John Peace, chief executive, said interim profits would beat market forecasts, prompting the shares to leap by 5 per cent as analysts raised their full-year profit targets.

Underlying sales at Argos, the High Street's answer to one-stop shopping, had outstripped the retail market to rise by 7 per cent in the six months to 30 September. Growth at the 540-strong chain slowed to 6 per cent in the second quarter from 8 per cent in the first three months, but this was better than the market had expected. Sales at Homebase, the do-it-yourself retailer GUS bought in December, and Experian, its financial information services arm, also topped expectations.

"It's hard to fault them," one retail analyst said, as the group's house brokers, Cazenove and Merrill Lynch, increased their full year pre-tax profit forecasts by 3 per cent to £780m. GUS rose 38p to 770p.

David Tyler, the finance director, said Argos had widened its range and dropped its prices, with consumer electronics, mobile phones, bedding, textiles and toys selling well. But he cautioned: "We do anticipate it being quite difficult to continue outperforming to this degree."

He said Homebase had suffered slightly from the hot summer, although the 2 per cent like-for-like sales increase was better than feared.

GUS is repositioning the chain towards the softer side of DIY and has launched a new home furnishings range in ten stores called "mi Home".

The Experian arm, which analysts expect to be spun off next year, delivered underlying sales growth of 13 per cent, with its North American division contributing 10 per cent growth as remortgaging activity and demand for credit checking services remained strong.

Tyler said the group's long-term plan was to reduce its 77 per cent stake in Burberry, the fashion group, "to nothing" but he declined to be drawn on timing.