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Another tough year for GUS as retail market tightens.

The owner of Argos and Homebase said yesterdaythat it was bracing itself for another tough year, after seeing sales decline at both its retail businesses.

GUS, which also owns Burberry, told investors that like-for-like sales fell three per cent at catalogue business Argos in the six months to September 30, while the figure for Homebase was four per cent lower in the periodsince the end of February. The group said that while both chains had outperformed their competitors it was still planning on the assumption that sales for the market as a whole would be in decline over the next 12 months.

GUS also warned that cost increases faced by the retail sector as a whole were affecting Argos and, in particular, Homebase.

Argos increased its sales by four per cent in total in the first half of the financial year, with seven per cent of this coming from the opening of 44 new stores - including 30 of the 33 Index outlets picked up earlier this year from Littlewoods.

Compared with last year, there were good performances from consumer electronics products such as MP3 players, while white goods and toys also sold well.

At Homebase, sales declined by one per cent overall and by four per cent when the impact of store openings is stripped out.

GUS said there had been strong performances from horticulture and from big tickets items, especially in kitchens and furniture, as the chain benefited from new ranges and the addition of trading space.

As well as higher costs, GUS warned that increased promotional activity may affect Homebase profits when the company reports results on November 17.

The figures are set to show a much stronger performance from credit checking arm Experian, which achieved a 29 per cent increase in sales for the six months to September 30.

GUS chief executive John Peace described the performance by Experian as "outstanding" and added that there were positives to be drawn from the UK retail arm, particularly in the area of margins.

He added: "Argos Retail Group continues to be affected by the challenging UK retail environment but made good operational progress in the half."

Plans announced earlier this year to spin off GUS's 65 1 /2per cent interest in Burberry were on track, GUS said, but it did not provide further updates on its split up of the group.

GUS said in May it planned to break itself up in a bid to net more value for its shareholders, starting with Burberry. GUS investors will get Burberry shares, which they can either sell or keep, in proportion to their GUS shareholding
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Oct 13, 2005
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