Argos firm warns of falling sales

Home Retail Group share price

The owner of the Argos and Homebase chains, Home Retail Group (HRG), has warned that its sales are set to fall as consumer spending slows.

HRG's comments came as it reported a 15% increase in underlying profits to �433m for the year to 1 March.

Despite the rise, it warned that "the outlook for consumer spending looks weaker" for the current financial year.

It added that the Homebase DIY chain had started the year "weaker than anticipated" following poor weather.

'Difficult conditions'

HRG said total sales for the 2007/08 financial year had risen by 2.3% to �5.99bn.

Like-for-like sales - which strip out the impact of new stores - had risen by 0.7% at Argos, but fell 4.1% at Homebase.

"Record profits have been achieved at Argos, and Homebase has traded relatively well in more difficult market conditions," said chief executive Terry Duddy.

However, the retailer warned that underlying sales were set to fall in the months ahead.

"A more difficult consumer environment is likely to result in a negative like-for-like sales performance in both businesses in the short term," the firm said.

HRG said Argos had begun the new financial year trading in line with its expectations.

However, it said that sales at Homebase had been hit by poor weather during March and April, contrasting with good weather at the same point last year.

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