The company said it expected full-year pre-tax profit to be around the mid-point of its previously indicated range of £250m to £275m.
Sales at Argos stores open more than a year fell 4.9 percent in the 18 weeks to 1 January, which includes its fiscal third quarter, compared with an expected 5.7 percent decline, according to a company poll of 17 banks and brokerages.
Sales had dropped five per cent in the second quarter.
Homebase like-for-like sales fell 1.2 per cent, compared with an expected fall of two per cent and with flat second-quarter sales.
Argos gross margin fell 25 basis points on increased clearance activity, while reduced promotional activity helped boost Homebase gross margin by 75 basis points.
Shares in Home Retail, which last September lost its place in Britain's FTSE 100 have lost 29 per cent of their value over the last year, as cash-strapped low-income shoppers trimmed spending.