Home Retail Group has lowered its year end forecast after Argos reported a dip in sales and trading conditions were more volatile than it expected.

For the final eight-week trading period for the year ending February 26, Argos reported like-for-like sales were down 4.6% and total sales down 3.1%. Homebase reported like-for-like sales up 3.8% and total sales up 1.8%.

Terry Duddy, chief executive of Home Retail Group, 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. 

“As a result, group benchmark pre-tax profit for the year just ended is now expected to be between £250m and £255m.  Against the backdrop of the challenging economic environment, and taking in to account our most recent trading, we are now planning with increased caution for the year ahead.  The group has a strong financial position and we continue to focus on driving forward our operational performances while investing further across the businesses.”

The retailer said Argos has suffered as the video gaming market has continued to be weak and the audio market also challenging. It said laptops and tablets saw a strong performance and white goods and toys remained in growth.

The internet grew to be 36% of Argos’ sales, up from 33% a year earlier. It said the approximate 150 basis points of gross margin reduction was driven by an increased level of clearance activity.

At Homebase, the retailer saw growth in big-ticket sales driven by bathrooms and bedroom furniture. Sales for its remaining categories were broadly flat.

It said the approximate 300 basis point gross margin improvement was driven principally by stock management benefits and a reduced level of promotional activity, partially offset by a sales mix impact.

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