The near-nine per cent fall in sales at Argos stores open more than a year in the 18 weeks to 31 December means the group now expects to make just £100m profit for the year.
Chief executive Terry Duddy blamed the problems at Argos on declining demand for its consumer electronics. The sale of video games slid by 20 per cent from the same period last year while the sale of tablets and iPads helped to stem some of the loss.
The group, which is facing intense competition from supermarkets and internet players, has been particularly hit as low-income customers struggle with severe budget squeezes.
“We will continue to plan cautiously with an ongoing focus on managing robustly both the cost base and the cash position of the group,” Duddy said in a statement, indicating a “significant cut” in the full year dividend.
He said HRG would close its four-store UK homewares trial HomeStore&More at a cost of £10m and also pledged to scale back Argos’ 750-strong estate as leases come up for renewal over the next five years.
Philip Dorgan, an analyst at Panmure Gordon, said he believed the company will need to go through “a costly, hard and painful restructuring operation, involving significant store closures” and possibly, a rights issue, as more sales go online.
Meanwhile Argos’ sister company Homebase was also a casualty on the high street, reporting a 2.6 per cent fall in like-for-like sales after seeing a reduction in big ticket kitchen and bathroom sales.
HRG shares fell 8.9 per cent to 83p.