A warning that full-year profits would be lower than expected sent shares in Home Retail Group down by nearly 6 per cent yesterday.
The Argos and Homebase owner blamed an increasingly cautious consumer for the warning, which came after it reported a 4.6 per cent fall in like-for-like sales at Argos in the first eight weeks of this year.
The catalogue shopping chain expected the decline to continue at a similar level for the rest of the year, with sales of computer games and audio equipment, including iPods, particularly weak.
Terry Duddy, the chief executive, said: “It has been much more challenging than we were expecting. We’re trying promotions that would normally generate a response and they’re not working.”
Consumers had reined in spending since Christmas amid higher food and fuel costs, deciding “this is not the time for me to spend”, he said.
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“Against the backdrop of the challenging economic environment and taking into account our most recent trading, we are now planning with increased caution for the year ahead,” Mr Duddy said.
Full-year like-for-like sales at Argos fell 5.6 per cent to £4.2 billion.
Home Retail Group’s pre-tax profits for the full year are expected to be £250 million to £255 million, below initial forecasts of £250 million to £275 million.
The Homebase chain performed better, with like-for-like sales in the first eight weeks of 2011 rising 3.8 per cent to £208 million, with “big-ticket” sales such as bedroom furniture doing well. But the good start to 2011 still resulted in full-year sales falling 0.3 per cent to £1.6 billion.
Home Retail shares closed down 12½p at 198½p.