Home Retail says profit on track

Home Retail Group Plc said yesterday it expected to meet expectations for first half profit despite worse-than-expected second-quarter underlying sales at both its businesses, Argos and Homebase.

"The performance of Argos and Homebase in the latest quarter was reflective of a difficult consumer environment," chief executive officer Terry Duddy said in a statement.

At high street catalogue retailer Argos, which accounts for 85 per cent of group profit, like-for-like sales for the 13 weeks to August 30 fell 5.8 per cent.

This compares to analysts' consensus forecast of a fall of three per cent and flat first-quarter sales.

Argos's gross margin, a measure of profitability, fell 25 basis points, better than analysts' expectations of a fall of 75 basis points.

Home improvement business Homebase saw its like-for-like sales fall 8.3 per cent. This compares to analysts' forecasts of a five per cent fall and a slump of 12 per cent in the first quarter.

Its gross margin was up 125 basis points, slightly better than analysts' hopes, driven by sourcing and supply chain progress.

Duddy said the group's full-year performance would be dependent on the key Christmas trading period.

Many UK retailers are struggling as shoppers curb spending to cope with higher food, fuel and mortgage costs.