Home Retail hit as shoppers cut back

Home Retail posted an expected 23 per cent fall in first-half profit as cash-strapped low-income shoppers trimmed their spending.

The firm, which owns Argos and DIY business Homebase, said it made an underlying pre-tax profit of £95m in the six months to 28 August.

That was in line with company guidance of a 20-25 per cent fall on the £123 million pounds made in the same period last year.

Total sales fell thee per cent to £2.72bn

Sales at Argos stores open over a year fell 6.5 per cent.

Like-for-like sales at Homebase fell 0.8 per cent. Home Retail has been particularly hard hit by a fall in consumer confidence because it sells discretionary goods to mostly lower income shoppers, which have not benefited as much from big falls in mortgage rates as those with higher incomes.

With the group exposed to the mass market consumer through Argos and the housing market through Homebase, it is seen as vulnerable to the public sector spending cuts the government will announce later on Wednesday.

"We are about to enter our busiest trading period, and whilst we are planning cautiously, we do so from a position of operational and financial strength," said Chief Executive Terry Duddy.

Home Retail, which ended the half with net cash of £327m, maintained its interim dividend at 4.7 pence.

Last month Home Retail lowered its guidance for year to end-February 2011 underlying pretax profit to £250-275m, down from the £293m made in the previous year.

Shares in Home Retail, which last month lost its place in the FTSE 100, have lost a quarter of their value over the last year.