Homebase hit by high street slump

With rivals also admitting that sales of big-ticket items are on the slide, Homebase said like-for-likes are down 12% in the 13 weeks to the end of May at £440 million.

Parent company Home Retail Group was boosted by a decent performance from catalogue business Argos, which managed to keep sales flat over the same period at £929 million.

This was thanks to customers' increasing willingness to buy online - 22% of all Argos sales - and the continuing fascination of teenagers for computer games and the consoles needed to play them.

As a result, Home Retail - which will drop out of the FTSE 100 in a reshuffle today - thinks it will still achieve City profit forecasts for the year of around £380 million despite the economic downturn. But even if it does, this will still be down from £433 million last year.

Chief executive Terry Duddy admitted he was "battening down the hatches", but said new store openings would continue as planned and that he had no plans to cut costs by firing staff.

"We already run a pretty tight ship," he said.

Duddy described the performance at Argos as "resilient" while Homebase was "worse then we were planning, but not that far off our internal plan".

The shares are down from a year high of 469p, slipping again today by 131/2p to 2101/4p.

With consumer confidence falling to new lows each week, retailers are engaged in a tough battle, trying to lure customers in with price cuts while maintaining profit margins on the most popular items.

Homebase rival B&Q saw like-for-like sales down 8% over the same period.

Yesterday, Tesco interrupted a pattern of relentless sales growth to say consumers were buying less non-food items than before.

Retailers were also buffetted by the bad weather in March and April, which makes the comparison with the favourable conditions of a year ago look especially harsh.

Duddy said: "While the consumer outlook remains challenging, we approach it from a position of both financial and operational strength."