Home Retail Group is braced for the worst Christmas in years after revealing that trading in the past few weeks has been disastrous.

The Argos-to-Homebase group unveiled results for the last six months that were in line with City expectations, but came close to a profit warning as it prepared shareholders for the pain to come.

It also made a £540 million goodwill write-off for Homebase stores, which retail analyst Nick Bubb of Pali International called "hugely embarrassing, but not that surprising either".

Sales across the group were flat at £2.74 billion in the half-year to the end of August. Like-for-likes sales fell 3% at Argos and 10% at Homebase. Profits sank 22% to £106 million, but worse is likely to follow.

Chief executive Terry Duddy said trade has "worsened in the turbulent recent weeks" with sales in the "high single digits" since August.

Profits for the year will be at the bottom of City expectations, at £327 million, if sales stay as they have been recently. Homebase has managed to hold its interim dividend at 4.7p and has cash in the bank of £275 million, suggesting the final dividend is safe for now.

The exceptional charges at the Homebase stores are for "onerous lease provisions", an admission that up to 20% of the 300 stores are not currently profitable.

The shares fell 8¼p to 185¾p.

Duddy added: "The challenging conditions look set to remain for some time." Next year could be worse than this one, warns the company.

Argos, celebrating the 35th year of its catalogue, is regarded as a more resilient business than Homebase. But it has its own problems, which suggests trouble ahead for rivals in the electrical goods field such as Currys owner DSG.

"It is a bit of a shocker for Argos. The weak sales at Argos do not augur well for tomorrow's DSG trading update," said Bubb.

DSG shares fell 2¼p to 23½p.