More on GUS
GUS H2 trading statement
GUS’s retail businesses performed adequately rather than spectacularly. Like-for-like (LFL) sales were flat at Argos and little better at Homebase so retail sales growth was largely driven by expansion. More encouragingly gross margins have been increased despite price reductions, but this is a slight improvement and the continuing price cuts underline how competitive the retail environment now is. Although Argos can justify the low growth given the current environment, we are disappointed that the continuing roll-out of the expanded Argos Extra catalogue (to 179 of 592 stores) has failed to produce any LFL growth.
Homebase produced some LFL growth (2%) and better margins (although we do not yet know how much better). Improved versions of the Homebase format are also producing encouraging results but the DIY market remains vulnerable to the housing cycle which appears to be close to the top at the moment.
Experian is continues to perform strongly with about half its 18% growth being organic (the other half obviously coming from its string of acquisitions). It is a strong business in a growing market but it is hardly an obvious fit with the rest of GUS.
Burberry (66% owned by GUS) is, yet another business that is different from the rest of GUS. Although it has retail operations these are obviously very different from Argos or Homebase. It also has wholesale operations and licenses its brand. Most of all it is a company that is based on a brand rather than a product or process. We recently commented on its somewhat slower growth than in the past.
At 901p the prospective PE of 14× is a moderately high rating, and the 3.6% yield is good but not particularly so for the sector. Although the lack of LFL growth at Argos is disappointing this is against a background of weak consumer spending and it may still have room to produce good growth. Experian is in a growth market, as are some of Burberry’s operations (those outside the UK and US, especially in Asia).
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