Home Retail Group (HRG) has said it expects profit before tax (PBT) to drop by 20-25% for the first half of 2010, with sales at Argos continuing to fall.
Total sales at Argos declined by 2.8% to £924m for the 13 weeks to August 28 (Q2), equating to a like-for-like sales drop of 5%, according to a trading statement released today.

Video gaming and big-ticket home areas such as furniture saw "challenging conditions", while small ticket homewares items were ahead.

Gross margin saw a 125 basis point decline, driven by adverse currency and shipping rates, as well as a rise in promotional activity. Four new stores opened and two closed, taking the portfolio to 749.

Check & Reserve saw further growth, with the internet representing 32% of Argos' total sales, up from 28% last year.

Homebase saw total sales decline by 1.1% to £396m, while maintaining flat like-for-likes for the quarter. Seasonal categories saw growth overall, led by garden planting and outdoor furniture. Big-ticket sales were also ahead, with growth in kitchen, bathrooms and bedrooms.

Gross margin declined by 75 basis points and the quarter saw two store closures, reducing the portfolio to 345.

HRG chief executive Terry Duddy said: "While Homebase has produced a good first half peak trading performance on top of last year's strong result, total group benchmark PBT in the first half is expected to reduce by approximately 20-25%. For the year as a whole, we expect to deliver group benchmark PBT of £250-275m, which is in line with the bottom half of the current analyst range. As always, the outcome will depend upon trading at Argos in its peak Christmas period."