Few Home comforts as Argos continues to feel the pain

Home Retail Group, which owns Homebase, is also more cautious about the year ahead and warned Argos faced another year of falling sales. It is the latest gloomy update from the mass market retail business, which has felt the brunt of low consumer confidence and rising input costs.

Home Retail said it now expected profits for the financial year ending last month to be between £250m and £255m, rather than in the region of £263m predicted two months ago.

Chief executive Terry Duddy said: “There are clear signs of further pressures on consumer spending, with recent trading conditions, particularly at Argos, proving to be more difficult and volatile than we anticipated.”

Argos saw like-for-like sales drop 5.6 per cent in the financial year and Home Retail warned it expected a similar decline in the current year.

The final quarter of the year saw a 4.6 per cent drop in sales, but this compared with a weak period a year earlier when snow caused a decline of 9.4 per cent.

Home Retail said the video gaming market continued to be weak, offsetting strong performances for laptops and tablet computers and further growth in the white goods and toy categories.

Margins came under pressure as Argos was forced into an increased level of clearance activity.

The group added that Homebase like-for-like sales were down 0.3 per cent over the year and looked set to be broadly flat in the current financial year.

Homebase saw like-for-like sales increase 3.8 per cent in the eight weeks to February 26, helped by sales of big-ticket items such as bathroom and bedroom furniture. Reduced levels of promotional activity benefited margins.