Homebase saw its sales drop 4.1% in the 12 months to March 1 as its owner the Home Retail Group (HRG) warned of tough times ahead.
The parent reported a 15% hike in pre-tax profits to £433m and an overall 2.3% increase in sales. Homebase's sister company, Argos, grew its sales by 2.3% to £2.55bn.

However, the performance was overshadowed by the group's concern over the economy.

Chief executive, Terry Duddy, said: "Record profits have been achieved at Argos and Homebase has traded relatively well in difficult conditions. However, the outlook for consumer spending looks weaker for the new financial year.

"A more difficult consumer environment is likely to result in a negative like-for-like sales performance in both businesses in the short term."
He added that Argos has begun the new year trading in line with expectations, while the performance of Homebase has been weaker than anticipated as poor weather conditions in March and April contrasted with the conditions in comparable months last year.

The Home Retail Group has a 10% share in the £60bn home and general merchandise market and says it has a clear agenda to deliver 'long-term' growth.

It expects to extend its online presence, which delivered £900m of sales last year and to continue its store opening programme.

It aims to open 30 new Argos stores and 10 new Homebase outlets in the coming year. It currently has 707 Argos stores and 331 Homebase sites.

In October last year it bought 27 former Focus DIY outlets - a move that prompted an Office of Fair Trading (OFT) investigation, which resulted in HRG undertaking to dispose of one store in an area where competition was deemed unfair to other traders.

· For more details and analysis, don't miss the May 9 issue of DIY Week.