Gusbourne Regulatory News (GUS)

14 Sep 2006 07:03

GUS PLC14 September 2006 14 September 2006 GUS plc Home Retail Group Trading Update Home Retail Group (formerly Argos Retail Group), the UK's leading home andgeneral merchandise retailer which is part of GUS plc, this morning issues anupdate on trading to coincide with the publication of its prospectus latertoday. Terry Duddy, Chief Executive Officer of Home Retail Group, said: "Home Retail Group has made good progress against varied conditions in ourproduct markets. While remaining cautious on the outlook for the UK consumer inthe near-term, we look forward to continued success as a separately listedcompany." % change in sales year-on-year--------------------------------------------------------------------------Five months to 31 August 2006 % Argos - total 13 - like-for-like 5 Six months to 31 August 2006* Homebase - total 1 - like-for-like (3) --------------------------------------------------------------------------* Homebase's year-end is the end of February to avoid distortions relating tothe timing of Easter For the early part of the financial year, the non-food, non-clothing market inthe UK was stronger than expected. However, with continued weakness in certainproduct markets, Home Retail Group remains cautious on the outlook for asustainable recovery in the rate of growth of consumer spending in thenear-term. ArgosArgos again outperformed its market in the period, with total sales up 13% ofwhich new stores contributed nearly 8%. At 31 August 2006, Argos traded from 670stores, with a net 13 new stores opened in the period. Like-for-like sales increased by 5%, boosted by an outstanding performance inthe first three months of the period. In the lead up to and during the course ofthe World Cup, sales of flat panel TV packages and set top boxes grewparticularly strongly. Video game systems and bedroom furniture continued toperform well throughout the period. There was also strong growth in child safetyand other nursery-related lines, and in seasonal products boosted by the warmerweather in July. The overall strong sales performance in the period was, however, substantiallyoffset by a related reduction in gross margin particularly in the first threemonths of the year. This was driven by the shift in the product mix and by thepopularity of Argos' promotional offers, partially countered by the benefitsobtained from supply chain initiatives. Argos Direct, the delivery to home operation, grew by 13% in the period andaccounted for 25% of Argos' sales. Within this, Internet orders for delivery tohome rose by 46%, representing 8% of total sales. An additional 10% of saleswere reserved by phone or the Internet for later collection in store (theservice known as Check and Reserve), which was 61% ahead of the same period lastyear. The Autumn/Winter catalogue was launched on 29 July with about 17,000lines available to customers across all stores and channels. HomebaseSales at Homebase increased in the six months to 31 August 2006 by 1% in total,of which 4% came from new stores. Homebase opened a net seven stores in theperiod bringing the total to 304, of which 156 had a mezzanine floor. Like-for-like sales declined by 3%. Sales of furniture and kitchens continued toshow strong growth throughout the period, while core DIY and decorating rangesremained weak. The improvement in sales in the later months of the period waslargely driven by warmer weather encouraging purchases of seasonal categories,particularly air conditioning and horticulture. As planned, gross margin wasahead of the previous year due to a reduced level of promotional activity in theearlier months of the period, together with the benefits obtained from supplychain initiatives. Financial ServicesHome Retail Group Financial Services is trading in line with expectations.However, its response to the recommendations of the recent OFT enquiry inrespect of late payment fees is expected to impact current year reported profitfrom early in the second half by about £3-4m. The impact is expected toannualise in the following financial year. As announced last month, a joint venture with Barclays Bank PLC will develop anArgos credit card proposition and new personal loan products for Argos andHomebase. Home Retail Group's existing Argos and Homebase store card operationsare not impacted by this arrangement. Future announcements Home Retail Group will announce its Interim Results on 21 November 2006. Enquiries Home Retail GroupRichard Ashton Finance Director 020 7495 0070Stuart Ford Head of Investor Relations Finsbury Rupert Younger 020 7251 3801Rollo Head This announcement is available on the Home Retail Group website,www.homeretailgroup.com, and the GUS website, www.gusplc.com. All financial information in this Trading Update is based upon unauditedmanagement accounts. Certain statements made are forward-looking statements.Such statements are based on current expectations and are subject to a number ofrisks and uncertainties that could cause actual events or results to differmaterially from any expected future events or results referred to in theseforward-looking statements. This information is provided by RNS The company news service from the London Stock Exchange