Argos sales fall short on weak video games, TV demand

* Argos like-for-likes fall 5 pct, against forecast 0.2 pct fall

* Homebase eight-week like-for-likes fall 0.9 pct

* Argos video games, TV categories disappoint, says owner

* Shares (Berlin: DI6.BE - news) fall 10 pct (Adds executive comments, shares)

By Paul Sandle

LONDON, March 12 (Reuters) - A slump in demand for video games and higher-priced televisions sent like-for-like sales at Argos tumbling in recent weeks, the chain's owner Home Retail (Other OTC: HMRLF - news) said, and it expects the tougher trading environment to persist in the coming months.

Home Retail, Britain's biggest household goods retailer, said sales at its Argos stores open for more than a year fell 5 percent in the eights weeks to end-February, much worse than the 0.2 percent fall the market had expected.

Sales at its Homebase DIY chain on the same measure also disappointed, dropping by 0.9 percent against predictions for a rise of 0.4 percent.

Home Retail Finance Director Richard Ashton said Argos, which trades from 734 stores, was hit by lower average selling prices for TVs and low demand for video games in the fourth quarter.

He said he expected those categories to remain weak for the foreseeable future. "That will have a bit of a drag on the sales momentum at Argos through the beginning of the new financial year," he told reporters on Thursday.

Shares in Home Retail fell to a four-month low of 173 pence after the update. They were trading down 10 percent at 177 pence at 1001 GMT.

The group has been focusing on its larger and more profitable Argos chain, which is being transformed from a catalogue-based retailer into a digitally-led business.

In contrast, its Homebase chain is being scaled back to reflect less enthusiasm in Britain for home DIY projects.

Home Retail, however, said cost controls and improvements to its margin had helped the group's bottom line, and it expected pretax profit for the year that ended on Feb. 28 to be at the top end of market forecasts of 120 million pounds to 132 million pounds. (Editing by Kate Holton and Pravin Char)