Home Retail warns of 25pc drop in profits

Home Retail Group said like-for-like sales at Argos fell 6.5 per cent in the six months to August 28, with margins at the catalogue chain

also under pressure due to promotional activity and the impact of currency movements on import costs.

Homebase's like-for-like sales were down 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 reduce by between 20 per cent and 25 per cent and that it was on course for full-year profits of between 250m and 275m – in the bottom half of the City's forecast range.

Home said the final outcome will depend on Christmas trading at Argos, where market conditions have become more testing, particularly in video gaming and 'big-ticket' home-related areas such as furniture.

Computers, white goods and toys all continued to show good growth, while lower priced homewares sales were ahead of a year ago.

And while Argos's like-for-like sales were down 6.5 per cent overall for the half year, the trend showed an improvement in the second quarter with a drop of 5 per cent. Total sales for the 749-store chain were down 4 per cent at 1.81bn.

A good season for sales of garden planting and outdoor furniture items boosted Homebase.