City fears grow over Home Retail Group as sales plummet

CITY concerns are mounting over Argos and Homebase owner Home Retail Group amid warnings it is vulnerable to a potential "double-whammy" from consumer caution.

The firm, which reports interim figures this week, warned last month that profits would be down by as much as 25 per cent as it battles tough trading conditions.

HRG said at the time that sales at Argos had plunged 6.5 per cent in the six months to 28 August, with profit margins also under pressure due to promotions. At Homebase, same-floorspace sales slipped 0.8 per cent.

As a result, several City analysts have downgraded their interim group profit forecasts.

One HRG follower, who is now forecasting a 23 per cent tumble in HRG's group profits to 94 million on sales down 3 per cent at 2.8 billion, said: "Its customer base is at the lower end of the demographic, in the eye of the storm of the coming public sector cuts. The mass market is a difficult retail place to be in that situation."

Another analyst said Homebase faced a tougher environment than its rivals. "Homebase has held up quite well, but it is much smaller than B&Q and a bit more expensive, with more affluent customers. That means the company potentially faces a double-whammy at Homebase and Argos if there is a correction in the housing market."