Consumer misery hammers Home Retail

Argos, which generates about two-thirds of group revenue, is struggling most. Like-for-like sales at the high-street chain slumped 9.1 per cent as hard-pressed consumers cut back on discretionary spending. Consumer electronics, notably televisions and video game systems, have been especially hard hit – that market declined 20 per cent in the period. Argos' gross margin dropped 75 basis points, too. Management is, however, spending £22m rolling Argos out into China through a 49 per cent owned joint venture with Haier Electronics – an unexpected decision after being forced to close its six stores in India in 2009. DIY chain Homebase isn’t exactly booming, either. With big-ticket categories under pressure, like-for-like sales there fell 0.6 per cent and the gross margin dropped 25 basis points.

Seymour Pierce has cut its full-year pre-tax profit forecast by £10m to £125m, with its EPS estimate cut by 0.9p to 10.9p. The broker is assuming that the full-year dividend will be halved, too.