Shares in Home Retail Group (HRG) slumped in early trading today after the owner of Homebase and Argos plunged into the red with a £437 million pre-tax loss over six months of trading.

The company gave warning that activity on the high street was continuing to deteriorate, and that the challenging conditions would continue for some time after worsening in the “turbulent recent weeks.”

Losses swelled at HRG over the six months to August 30, compared with a £169.3 million pre-tax profit last year, mainly due to a £542.3 million writedown on the value of its Homebase business. Shares in HRG fell by 7.22 per cent to 180p.

The DIY chain is now valued at just £350 million, compared with the £900 million HRG paid for the business when it acquired the operation in 2006.

Homebase reported like-for-like sales down 10.3 per cent over the six months and total revenue, which includes trading from new sites opened during the period, fell from £853.9 million last year to £829.3 million.

HRG said: "The economic environment has seen a shift from growth to decline in the level of household discretionary spending. There has been significant price inflation in basic necessities such as food, fuel and other household bills, along with the impact of higher consumer borrowing costs.

It added: "...consumer confidence has been negatively affected by the weakening of the housing market, unemployment and recessionary fears, together with the overall global financial crisis."

Like-for-like sales at Argos dropped 3 per cent but total revenue rose by £1.85 billion over the six months. Total group sales were flat at £2.7 billion.

The company warned today that if consumer spending continues to deteriorate, "calendar 2009 is likely to be at least as challenging as 2008".

However, despite the turmoil, the company maintained its interim dividend at 4.7p.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive