GUS - Great Universal Stores (UK)

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Once Britain's largest retail group, GUS completed its long-expected break-up with the demerger of its last two divisions at the end of 2006. Credit services agency Experian and UK merchandiser Home Retail Group were spun off separately to shareholders. A year earlier, GUS had completed the spin-off of upscale fashion retailer Burberry, after selling off its once extensive mail order businesses in 2004. Following these demergers, the main GUS parent was dissolved.

The roots of GUS were first laid down in 1900 when Manchester merchant Abraham Rose founded a mail order business under the name The Universal Stores, selling a wide variety of general goods. The business was incorporated in 1917, and was renamed Great Universal Stores in 1930, a year before it floated on the London Stock Exchange. In the late 1930s, GUS came under the increasing control of Isaac Wolfson, who went on to become a major figure in British commerce as well as the founder of a considerable retailing dynasty. The son of an immigrant cabinet maker in Glasgow, he had joined Great Universal Stores in 1932 as merchandise controller and gradually worked his way up, becoming chairman as well as majority shareholder by 1946. In the years following World War II, Wolfson masterminded a dramatic expansion of the business, buying up numerous other companies, not just mail order businesses such as Kay's or Marshall Ward, but also high street retail chains selling furniture, clothing and other items, as well as the manufacturing businesses which supplied them. At its peak, the group's retail brands included clothing shops Burberrys, The Scotch House, John Temple, Town Tailors, Harry Attwood, Jay's, Vogue Fashion Shops and Whitneys as well as department stores including Bladons and Waring & Gillow. By the early 1960s "Gussie", as the company was known to customers and investors, was Britain's largest retailer with more than 2,200 stores.

Wolfson also turned his attention to overseas markets. His international purchases included South African furniture and home appliances retailer Lewis Stores Group, Wehkamp in Holland, Halens in Sweden and Universal Versand in Austria. Wolfson also invested widely in other projects as diversified as an oil refinery in the Middle East to the Bushmills distillery in Ireland. Most of the profits from all these activities were channelled into charitable foundations and public works. Wolfson's belief was that "No man should keep more than £100,000. That's enough for any man. The rest should go to charity.'' As a result, he was the country's biggest private benefactor throughout the 1950s, 1960s and 1970s. Although he was also a major lifelong contributor to Jewish causes, much of his charitable giving was directed towards secular education in the United Kingdom, and he became the first figure since Jesus to have colleges named after him at both Oxford and Cambridge University. He was made a baronet in 1962.

Sir Isaac Wolfson passed control of the business in 1986 to his son Leonard (later Baron Wolfson of Marylebone), who had been a director of the group since the 1950s, and managing director since 1962. The late 1980s and early 1990s were marked by increasing profits but declining investment in group businesses. Leonard Wolfson in turn passed control to a younger cousin, David Wolfson. He had previously been one of Margaret Thatcher's key advisors, services for which he was made Lord Wolfson of Sunningdale, and was the man credited with rescuing high street retailer Next. He quickly made up for the previous ten years of inactivity. His first moves were to force a turnaround of the group's ailing Burberrys division, and to bolster credit rating arm CCN by acquiring US information business TRW Information Systems & Services for £1bn, merging the two companies to form Experian, one of the world's leading suppliers of credit information on consumers, businesses and property. 

But the biggest deal was the group's 1998 £1.9bn hostile bid for ailing high street catalogue shopping store Argos. (See Home Retail Group profile for more). The synergies between badly run Argos and GUS's substantial mail order catalogue businesses seemed huge, but the bid only just succeeded in winning the approval of shareholders, and GUS was slow to integrate Argos with its other catalogues. In effect the process only began to take place in mid-1999, over a year after the deal was completed. However by then the mail order business was beginning to suffer. The company claimed that sales had been hit by customers defecting to discount retail chains or cutting their expenditure. In summer 1999, to reflect lower demand, Argos's product lines were reduced by almost a fifth to 7,300 items. 

Around the same time, the group's Burberry division saw profits collapse as a result of economic turmoil in its biggest market, the Far East. This, combined with the £2bn of debt accumulated by its shopping spree, put GUS under considerable financial pressure. At the end of 1999, the group shocked the financial markets by issuing a profits warning, its first in 82 years of trading. To raise cash, the group spun out Motivation.net, an internet loyalty scheme devised by Experian, and merged it with rival Intellipost to form MyPoints. Experian's online marketing business AdForce was also sold.

In 1999, newly appointed CEO John Peace launched a new strategy to strengthen the group's online operations as a way of supporting its main catalogue shopping business. The group paid £35m to acquire the web agency Reality, which became the core of a new division offering third party e-commerce services through GUS's catalogue shopping gateway. The group also sold off its motor finance division Highway Vehicle Management. As expected, the group released disappointing financials for year ending 2000. Worst of all were profits in the UK catalogue division, down by 80%. GUS took the opportunity to merge that arm with its main Argos business as Argos Retail Group. Later that year GUS acquired online retailer Jungle.com, a rival to Amazon, for £37m, effectively doubling its internet business. Lord Wolfson of Sunningdale announced his retirement at the end of the year.

The substantial restructuring of GUS continued over the following years. In particular, the group's once substantial home shopping division was gradually disposed of between 2001 and 2005. However sales and margins in this business had declined steadily during the 1990s. Various mail order operations in Continental Europe were sold or closed in 2001 and 2002. The following year GUS closed several UK catalogues (including McCord and Innovations) and sold the remaining portfolio, including Great Universal, Kays, Marshall Ward as well as home delivery network White Arrow and ecommerce supplier Reality, to the private business empire owned by Sir David and Sir Frederick Barclay for £590m. (The deal was finally approved by UK regulators at the beginning of 2004). The Barclay brothers already owned rival catalogue Littlewoods. (That business is now Shop Direct; the GUS brands were all gradually amalgamated into Littlewoods). GUS took a £210m loss on the sale of the business.

The group's last remaining catalogue business, Wehkamp of The Netherlands, was sold in 2005 for E390m. Lewis Group of South Africa was sold in two instalments in 2004 and 2005 for a total of around £245m. The group also began a gradual divestment of Burberry, by now restored to full health. Just under 23% of the business was floated in 2002 for a handsome £239m. A further 10% stake was sold in 2003, and the remaining shares were spun off to GUS shareholders at the end of 2005. Following a strategic review in 2004, GUS announced plans to demerge its remaining businesses. Credit services agency Experian and Home Retail Group were both spun off in October 2006.

Group sales from continuing operations for GUS's last full year, ending 2006, grew by 9% to £7.3bn. Pretax profits were flat at £649m. Sir Victor Blank was chairman, with John Peace as group chief executive. Peace later became non-executive chairman of both Experian and Burberry. Blank had an unhappy period as chairman of Lloyds Banking Group

Last full revision 1st April 2016


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