Home Retail profits slump

Home Retail posted a 70 percent slump in first-half profit, with profitability at its Argos business collapsing.

The firm, which also owns Homebase, the second largest do-it-yourself chain, said on market conditions were "weak and volatile."

"In these early weeks of the second half we have not seen the improvement in sales that we had anticipated," it said.

Home Retail made underlying pre-tax profits of £28.3m in the six months to August 27.

That compares with analysts' average forecast of £30m, according to a company poll of nine, and £94.7m made in the same period last year.

Operating profit at Argos was £3.4m, down from £54.4m. At Homebase it fell to £29.9m from £46.2m.

First half sales, reported last month, fell six per cent to £2.57bn, reflecting a sharp deterioration at Argos.

Home Retail, which ended the period with net cash of 200 million pounds, maintained its interim dividend at 4.7 pence. However, most analysts expect the final dividend to be cut.

British retailers are generally struggling as rising prices, muted wages growth and government austerity measures force shoppers to rein in spending on non-essential items.

Home Retail, which is facing intense competition from supermarkets, specialist and Internet players, has been particularly hard hit as its predominantly low-income customers are suffering the most severe squeeze on their budgets.