More on GUS
GUS Q1 trading update
Argos and Homebase’s like-for-like performance deteriorated further so far this year (first quarter for Argos, first four months for Homebase) with Argos down 4% and Homebase down 2%. Although the consumer spending has been weak over this period and many retailers have seen weak like-for-like sales Argos is doing worse than most, which is particularly disappointing given that it has been expanding its product range. Previous increases in the number of products has driven like-for-like growth so this may signal that Argos is approaching the limits of a valuable growth driver.
Argos’ home delivery (+26%, 6% of sales) and internet (+24%, 7% of sales) sales channels performed better, but these are smaller and operating in a very competitive market in which margins are harder to maintain than in “bricks and mortar” retail.
Experian continued to perform very well with organic sales growth of 13% (acquisitions added another 14%). Nothing much has changed in terms of fundamental drivers of the growth, but the continued strong organic growth is very encouraging (even though it is in part simply cyclical).
We recently commented on Burberry’s first quarter results.
As GUS plans to sell its remaining 66% stake in Burberry this year we believe that investors should value GUS on the assumption that Burberry is worth its market price. Deducting the one value of the one third of a Burberry shareholders that GUS shareholders will receive for each GUS share and deducting GUS’s share of Burberry’s earnings from its EPS, at 916p GUS is trading at a prospective PE of 13×. Its 3.7% yield may change in the share consolidation that will follow but GUS is likely to continue to yield at least 4%. Experian clearly gives the rump business a strong growth driver, we are somewhat less certain about the future of Argos.
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