THE INVESTMENT COLUMN: Argos sidesteps high street woes

Few retailers had a better 1995 than Argos. As the catalogue retailer side-stepped the high street woes of many rivals, the shares rose by around 80 per cent and finished the year by soaring into the FT-SE 100.

Yesterday's figures showed why. Profits were 24 per cent higher at pounds 124m on sales up 14 per cent to pounds 1.4bn. This was in spite of higher costs caused by an extended print run of the company's catalogues and rising paper prices which made them more expensive to produce.

Argos's secret has been its low price, no frills operation, which has caught the mood of the budget-conscious 1990s. It also has plenty of scope for expansion

The company now has 367 stores including 56 superstores. Another 31 will open this year. Argos Call and Collect stores which carries no stock but guarantees delivery within 24 hours is proving successful in its three store trial. The trial of First Stop, which concentrates on lower priced consumer durables is to be tested in another location before roll out. Like-for-like sales also look promising. They rose by 7.7 per cent last year while the margin edged ahead from 7.3 per cent to 7.4 per cent. The trend has continued into the current year with like-for-like sales up 8 per cent.

The big question hanging over the shares was what management might do with the company's pounds 231m cash pile.

After the failure with the Chestermans furniture deal, an acquisition would have been frowned upon by the City. The pounds 127m special dividend is a safe option, though it will hit profits due to lower interest receivable next year.

Analysts have downgraded accordingly and BZW now expects profits of pounds 133.5m this year. With the shares down 2.5p to 638p yesterday that puts them on a heady forward rating of 22. After last year's spectacular run, they now look fully valued.

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