Argos's profits plunge by 32 per cent as boss warns about cutbacks

The chief executive of Home Retail warned the Government against making savage cuts to frontline services after lower-income customers reined in their spending at his Argos stores. Unveiling a 23 per cent fall in Home Retail's first-half profits, Terry Duddy said: "I think it is a good idea to pay back the deficit as fast as we can but I also think things need to be fair."

The Chancellor needed to combine "disassembling the government infrastructure" with careful treatment of frontline services and staff, as the private sector had done, he added.

Mr Duddy said he did not sign the recent letter from 35 bosses in support of rapid deficit reduction because he was not there when it crossed his desk. However, he agreed with its general message. "I would have added something about being fair and equitable," he added.

Home Retail's profit fell to £93m in the six months to 28 August. First-half profit at Argos, its biggest business, dropped by 32 per cent as cash-strapped customers cut back on major purchases such as games consoles, televisions and furniture.

Home Retail has lost its place in the FTSE 100 index and its shares have shed a quarter of their value in the past year because of its big exposure to mass-market consumers in line for cuts in public-sector jobs and benefits.

Mr Duddy said he was concerned about the effect of welfare cuts on Argos's customers, who were already under "greater pressure" in the first half. He said the company was planning cautiously for Argos's key pre-Christmas trading period and that the chain was likely to suffer a fall in sales of up to about 5 per cent. But he insisted that Argos had a strong long-term future and that store refits and other "self-help" measures might return it to growth next year. Argos will open between 10 and 15 branches this year and the same number next year, and would maintain its market share, he predicted.

Profits at Home Retail's DIY chain Homebase fell 6 per cent. Paul Loft, who heads the home-improvement retailer, claimed it was gaining market share in sales of big items such as kitchens because its stores appealed to women. He said Homebase would expand in furniture and floor installation to tap high levels of customer approval.

Sports Direct feels the pinch

Sports Direct warned yesterday that all British retailers would face "extremely challenging" trading conditions early next year.

Britain's largest sporting-goods chain said its own first-half results would be much better than a year earlier after sales were boosted by the football World Cup.

However, Dave Forsey, the chief executive, added: "We believe the early part of 2011 will be extremely challenging for all retailers in the UK."

Consumer confidence fell to an 18-month low in September as households prepared for the Government's austerity measures. Retailers fear spending cuts, tax rises and worries over job insecurity will hit demand.

Sports Direct, controlled by Mike Ashley, the owner of Newcastle United Football Club, said in a brief trading update that sales and gross profit for the nine weeks to 26 September both rose by 5.4 per cent.

Retail-division sales rose 6.9 per cent to £264m. Net debt is expected to be £240m on 24 October, down from £362m a year ago.

"We remain pleased with the continuing strong underlying performance across all divisions," Mr Forsey said.