Home Retail Group today came close to a profits warning just two months into its new year, after a shocking downturn at Homebase.

The firm, which also owns Argos, said sales at Homebase since the start of March were below expectations, having tumbled 4.1% in the previous 12 months.

Despite a more resilient performance at Argos, Home Retail was cautious about its prospects for the rest of this year as the economic slowdown hits sales.

Chief executive Terry Duddy said: "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: "Argos has begun the year trading in line with our expectations. However, Home-base has started the year weaker than anticipated, as poor weather conditions this March and April contrast with very good weather conditions in the comparable months last year.

"At this very early stage, it is too soon to evaluate the impact of these weather conditions on the outcome for the financial year as a while as further key trading periods remain."

Sales at Argos rose 0.7% in the year to 1 March but sank 4.1% at Homebase. Total sales were up 2.3% to £5.98 billion and profits rose 11% to £398 million as the firm improved margins. Argos profits grewfrom £300.9 million to £376.2 million while Home-base profits slipped from £51.2 million to £45.1 million.

Duddy said current trading at Homebase had been hit by bad weather, which trashed sales of outdoor furniture and garden products.

"But in truth, what we have begun to see is the impact of the slowdown in consumer spending," he said.