* Argos Q4 like-for-like sales down 8.5 pct
* Homebase Q4 like-for-like sales down 6.5 pct
* Sees full-year profit in line with expectations
* Sees another, though smaller, fall in profits this year
* Shares down 0.7 pct vs flat European retail sector
By Mark Potter and James Davey
LONDON, March 15 Home Retail,
Britain's biggest household goods retailer, urged the government
to take steps in its budget next week to boost the incomes of
lower and middle earners as it forecast a fifth consecutive year
of falling profits.
The owner of catalogue-based Argos stores and the Homebase
do-it-yourself chain said on Thursday there were reasons to be
more optimistic about the retail outlook for the coming year,
with inflation falling and events such as the Olympic Games in
London and the Queen's diamond jubilee likely to boost spending.
However, it said it was planning cautiously after a big drop
in sales at both Argos and Homebase in the 8 weeks to Feb. 25.
"What we totally agree with is the increase in the personal
allowance," chief executive Terry Duddy told reporters,
referring to proposals by Britain's coalition government to
raise the threshold at which people start paying income tax.
"We think that's an important factor and would lead to an
easing for the circumstances that people have got where they've
just seen disposable income falling."
Britain's retailers are mostly struggling as disposable
incomes have been squeezed by rising prices, muted wages growth
and austerity measures, and shoppers fret about rising
unemployment, a shaky housing market and the euro debt crisis.
Argos has been particularly hard hit because its mainly
low-income customers have suffered most and because it also
faces stiff competition from grocers, specialists and the
Sales at Argos stores open over a year dropped 8.5 percent
in the eight weeks to Feb. 25, broadly in line with a drop of
8.9 percent over the 52 weeks ending on the same date.
Duddy said shoppers were particularly cutting back spending
on electrical goods like televisions and video games, with sales
of the latter down 35 percent in the eight-week period.
Like-for-like sales at Homebase, Britain's No.2 home
improvements retailer behind Kingfisher's B&Q, slumped
6.5 percent in the quarter, worse than the full-year decline of
2 percent as sales of furniture, kitchens and bathrooms
The firm said it was on track to meet analysts' expectations
for a full-year underlying profit of around 100 million pounds,
which would be down sharply from 254 million the year before.
Finance Director Richard Ashton said it was reasonable to
expect another, albeit more modest, decline in the current
financial year, noting that analysts' average forecast was for
an underlying profit of around 80 million pounds.
"There are people who've said they could get to some
cautious optimism in the second half," Duddy said, referring to
falling inflation and events like the Olympics and jubilee.
"We wouldn't disagree with them, but from our point of view
we'd be better with a cautious plan rather than banking to
upsides that may or may not occur," he added.
Espirito Santo analysts said it was good news Home Retail
had avoided another profit warning, but saw little scope of a
"Trading remains tough and there is a long way to go before
we begin to see margins recover at Argos, in our view," they
wrote in a research note.
Home Retail shares, which have lost nearly half of their
value over the last year, were down 0.7 percent to 114.2 pence
by 0850 GMT, lagging a flat European retail sector.
American John Walden started as Argos's new managing
director last month and has been given a free rein to examine
all options for the struggling business, including closing some
of its 748 shops.
Home Retail said it shut a net 11 stores in the fourth
quarter as leases came up for renewal.
Duddy said 35 stores were coming to the end of their leases
this financial year, and a total of 185 over the next five
years. However, while the group was likely to close some of
these, he stressed that it would retain many of them and was not
going to embark on a rapid closure programme, that would be
costly if leases were ended early.
Home Retail warned in January it would cut its full-year
dividend for the first time since it listed in