Argos and Homebase sales fall

Home Retail, the owner of Argos and Homebase, said it was prepared for an "extremely challenging" 2009, with profits expected to slump 40 per cent.

The group, which said it would meet profit expectations for 2008, was responding to the tough economic climate by cutting costs, with 300 jobs shed in the last few weeks.

"Group benchmark profit before tax for the year just ended (year to 28 February 2009) will meet current market expectations," said Chief Executive Terry Duddy today.

"Whilst Argos had a better than expected sales performance in the latest period, the environment for the new financial year will be extremely challenging."

Shares in Home Retail have lost 17 per cent of their value over the past year.

At 9.45am the stock was down 15.5p, or 7.6 per cent, at 188.5p, valuing the business at £1.65bn.

Retailers are struggling as indebted consumers rein in spending amid soaring unemployment, sliding house prices and fears of a long and deep recession.

Home Retail said sales at shops open at least a year fell 1.6 per cent at Argos and 10.2 per cent at Homebase in the eight weeks to 28 February.

The Argos figure exceeded analysts' expectations of a fall of about 7.5 per cent while the Homebase outcome was in line with their forecasts.

Sales of consumer electronics and toys rose at Argos but demand for furniture and homewares was weak. At Homebase, strong growth in kitchen sales was more than offset by falling demand for garden maintenance and horticulture products.