Home Retail, Britain's biggest household goods retailer, posted flat first-quarter underlying sales at its main Argos chain, beating analysts' expectations, but said the trading outlook remained tough.
Home Retail also said today that like-for-like sales at its Homebase do-it-yourself chain plunged 12 per cent in the 13 weeks to May 31st, due in part to poor weather.
Home Retail, whose shares have more than halved over the past year amid a slowdown in consumer spending, said sales at Argos were boosted by lower margin consumer electrical goods. Gross margins at the chain fell 125 basis points.
Margins at Homebase, Britain's second-biggest home improvements retailer, were up by 125 basis points.
"While the consumer outlook remains challenging, we approach it from a position of both financial and operational strength, and at this early stage our expectations for the full year are unchanged," chief executive Terry Duddy said in a statement.
Britain's store groups are struggling as debt-laden shoppers cut back on spending amid rising food, fuel and mortgage bills.
Home improvements chains have been hit particularly hard as demand for more expensive items, like furniture and kitchens, has plunged. Kingfisher, which owns UK market leader B&Q, cut its full-year sales expectations last week.
Home Retail shares have underperformed the DJ Stoxx European index by about 39 per cent over the past year and are set to leave the UK's benchmark FTSE-100 index later this month. They closed at 223.75 pence yesterday, valuing the firm at about £2 billion.