Dire results at HMV and Argos spark festive trading fears

Two of the UK's biggest non-food retailers had a day to forget yesterday, as HMV unveiled a calamitous slump in sales and the continuing woes at Argos resulted in a profits warning for its parent, Home Retail.

Nearly 11 per cent was wiped off the market capitalisation of HMV Group, which also owns the bookseller Waterstone's, after it blamed the "disruption" of the World Cup for a dire performance at its high-street entertainment business.

The weak results at Argos and HMV reinforced fears that UK consumers are already reining in their spending ahead of the "golden quarter" when retailers make the bulk of their profits.

HMV UK & Ireland's like-for-like sales plummeted by 14.9 per cent over the 19 weeks to 4 September.

Simon Fox, the chief executive of HMV Group, said "the World Cup disrupted the pipeline for new entertainment products, and the games market continued to be weak," although he said it was in "good shape" for Christmas.

HMV entered the market for operating live music venues by acquiring Mama Group earlier this year, but said that festivals "performed below expectation".

However, underlying sales at Waterstone's fell by only 1.6 per cent.

Meanwhile, Home Retail, which also owns the DIY chain Homebase, warned that pre-tax profits would be down by up to a quarter for the half-year to 28 August. The profits warning came from underlying sales at Argos falling by 5 per cent in the second quarter, although this was an improvement on the 8.1 per cent slump in the previous three months.

Despite its last trading period covering the World Cup in South Africa, Argos said sales of TVs actually fell slightly. Market sources said that consumers had shunned Argos's own brands, Bush and Alba, and had bought bigger, more premium TVs from rivals, such as Currys.

However, Homebase fared better with flat underlying sales in the second quarter. Home Retail expects full-year profits of between £250m and £275m, in line with the lower range of City forecasts.