Home Retail Group, the owner of Argos and Homebase, this morning warned of a bleak outlook in the retail sector as it announced that full year sales growth would be hit by a slowdown in consumer spending.

Terry Duddy, the group’s chief executive, said: “Looking ahead, we continue to believe that the weakening consumer outlook, as already evidenced at Homebase, is likely to restrict growth in like-for-like sales in both businesses.”

In mid morning trading the company's shares were trading down 5.5p at 244.5p.

Like for like sales at Homebase, its home improvements chain, declined 5.3 per cent to £217 million in the eight weeks to March 1, with most product categories continuing to see “a difficult trading environment.” Although the company said that kitchen sales continued to grow. For the year ended March 1 like for like sales declined 4.1 per cent to £1.6 billion.

At Argos, eight-week like for like sales rose 1.9 per cent to £566 million, boosted by sales of computer games consoles. Although discounting in the January sales combined with lower margin products led to 50 basis points decline in margin. Full year like for like sales rose 0.7 per cent to £4.3 billion.

Internet sales at Argos grew by over a third and now represent 23 per cent of all sales.

Analysts at Landsbanki warned that there could still be more bad news to come for the company’s investors.

“With the worst of the current slowdown probably yet to impact, we still see downside risks in forecasts, particularly if the slowdown extends into 2009,” they said.

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