GUS warns on Homebase profits

GUS spooked investors with a profits warning for its Homebase chain, which is part of its Argos retail arm, but insisted its plans to list Argos and Experian as separate businesses remained on track.

David Tyler, GUS's finance director, said: "The demerger plan will happen irrespective of the market." GUS hopes to complete the separation in the autumn. Its shares fell 32p to 1,013p, the biggest fall in the FTSE 100 leader board.

In a trading update, GUS revealed that trading at Homebase, which competes against B&Q in the do-it-yourself market, had deteriorated faster than it had expected. Its attempts to stimulate sales with money-off promotions failed, hitting the gross margin. As a result, underlying profits at Homebase are expected to be about £50m, some 20 per cent below forecasts.

GUS said like-for-like sale at Homebase fell 5 per cent in the five months to 28 February, weighed by an 8 or 9 per cent fall in sales of its core DIY and decorating ranges. Mr Tyler said: "The DIY market is in a bad way."

His comments followed warnings from B&Q's owner, Kingfisher, that demand for DIY products was at a 10-year low.

The picture at Argos was slightly better, with flat like-for-like sales and a 9 per cent rise in total sales, driven by 65 new store openings during the year. These include the 33 Index stores the group acquired from Littlewoods.

Meanwhile Experian, which owns businesses that help consumers manage their finances, reported a 25 per cent rise in sales at constant exchange rates in the six months to 31 March. Sales rose 30 per cent at actual rates. It marked Experian's fourth consecutive year of double-digit growth.