Argos brushes aside failure: Payout up despite Chesterman problems

ARGOS, the catalogue-based retailer, lifted the dividend yesterday, brushing aside a pounds 9m fall in 1992 profits caused by the failure of its Chesterman furniture stores.

David Donne, chairman, said the increase was justified because profits in the core business were up, the average cash pile was now pounds 87m and the new year had started well.

Pre-tax profits in 1991 slipped from pounds 62.1m to pounds 52.9m after Chesterman made operating losses of pounds 6.2m and incurred pounds 12.7m of closure costs. The final dividend of 4.8p makes a total of 7p, up 9 per cent.

Total sales before VAT grew from pounds 926m to just over pounds 1bn. In the core business like-for-like sales growth has improved from minus 2.7 per cent in the second half of 1991 to minus 0.9 per cent in the next six months and plus 3.1 per cent in the next six months.

Most of the improvement was due to the conversion of narrow-range Best Sellers stores to full-range Argos outlets. The opening of larger superstores also helped.

The results, slightly ahead of expectations, boosted the shares by 10p to 315p in a falling market.

Sterling's devaluation would have a small impact on prices of imported goods, which comprise 60 per cent of the Argos catalogue. Prices of imports would have to rise by up to 5 per cent in the August catalogue, said Mike Smith, chief executive.

The group, which was demerged from BAT in 1990, is still looking for a second leg after Chesterman flopped. It has ruled out taking catalogue shops to the Continent after analysing the prospects in Germany, France, Italy and Spain.

It is now seeking diversification opportunities in the UK. These could be acquisitions or start-ups, but would not stray as far from management's area of core competence as Chesterman, Mr Smith said.

Mr Donne said he viewed the year ahead with 'cautious optimism'. However, the tax increases flagged in the Budget and other matters would dampen consumer confidence.

(Photograph omitted)