Argos owner warns of 25% slump in profits

Britain's largest household goods retailer yesterday warned that interim profits would be down by as much as 25 per cent as it battles tough trading conditions.

Home Retail Group, the owner of the Argos and Homebase chains, said sales and margins at its Argos stores were still falling as cash-strapped low-income shoppers trimmed their spending.

Like-for-like sales at the catalogue chain fell 6.5 per cent in the six months to 28 August, with margins were also under pressure due to promotional activity and the impact of currency movements on import costs.

At Homebase, the DIY chain, like-for-like sales slipped 0.8 per cent after a better-than-expected second-quarter performance saw it match trading figures a year earlier.

Overall, Home Retail said first-half profits were expected to be down by 20-25 per cent from 123 million a year ago. The group said it was on course for full-year profits of 250m to 275m - near the bottom of analysts' forecast range.

Mark Photiades at Singer Capital Markets said: "Home Retail's exposure to the mass market consumer through Argos, and the housing market through Homebase, leaves us with concerns about earnings prospects over the coming 18 months.