Catalogue stores deliver higher profits for GUS

The Argos catalogue shopping chain is driving retail conglomerate GUS to better than expected first-half profits, the company said yesterday.

In a positive trading statement ahead of next month's interims, GUS chief executive John Peace said the group - which spans Argos, Homebase and credit information agency Experian - had "good momentum" in all of its divisions.

The company had been expected to turn in £325m for the first half, but analysts hastily increased their forecasts and the shares - which have gained 35% in the past 12 months - raced ahead, closing up 38p at 770p.

The top performer was once again Argos, which has 540 outlets. Like-for-like sales rose 7% in the six months to the end of September. Consumer electronics, mobile phones, textiles and toys performed especially strongly.

Finance director David Tyler said the success of the Argos business was down to three factors - range, price and a big increase in home shopping.

The Argos catalogue contains 12,700 product lines, up 12% on last year, which was 25% up on the year before. The book is becoming so vast that GUS is experimenting with a new format using smaller pages and print. "The second reason Argos has done well is price," said Mr Tyler. "Prices on re-included lines are down 4% on last year."

The price reductions, he said, were partly the result of supply chain improvements and partly a benefit of currency movements, as so many of the products bought in are denominated in dollars.

Home shopping, with delivery direct to the shopper's front door, is also gaining in popularity. Argos Direct will deliver anything bought out of the book and sales in the first half were up 33%. About 23% of Argos sales are now direct, up from 20% a year ago.

Sales at Homebase were up 4% in total and 2% on a like-for-like basis. GUS is expanding the Homebase shopfloor space by building mezzanine levels and so far 53 out of the 273 stores have been so treated.

The UK arm of Experian has been boosted by the huge increase in credit borrowing. "We service that industry and so we have benefited," Mr Tyler said.

The US Experian business, which generates about 20% of GUS profits, increased sales by 10% at constant exchange rates and was boosted by the US mortgage refinance business, although this is slowing. However, a consumer creditwatch service, which allows ordinary consumers to check on their credit rating and ensure their details have not been stolen as part of an identity fraud, for a fee of $80 a year, grew 60% and now has 1.6m customers.

Mr Tyler warned that investors should not expect current growth rates to continue: "We feel good about the business but it would be wrong to predict the same for the second half."