Home Retail misses Christmas targets after Black Friday frenzy

* Argos and Homebase miss sales targets

* Reiterates profit guidance

* Shares (Dusseldorf: DI6.DU - news) down 7 percent (Adds reaction and CEO quotes)

LONDON, Jan 15 (Reuters) - Britain's biggest household goods retailer Home Retail (Other OTC: HMRLF - news) missed sales forecasts for its Argos and Homebase chains over Christmas as the shopping frenzy sparked by Black Friday skewed demand later in the holiday season.

The U.S.-imported sales day took hold in Britain in a major way in 2014. Argos saw its sales jump 45 percent on Nov. 28 when 13.5 million people visited its digital channels and thousands more its stores to snap up discounted electrical goods and products.

Several retailers have since said however that the cost was a sharp drop off in demand in the following weeks and an expectation for continued discounts, posing a threat to profitability.

Home Retail said it had taken a much more cautious approach to discounting. As a result, sales from Argos stores open over a year were up 0.1 percent in the 18 weeks to Jan. 3, well below the 2 percent growth that had been expected by analysts.

With Homebase sales only up 0.6 percent, against a forecast of 4.1 percent, shares in the group were down 7 percent in early morning trading, although the focus on margins meant it still expected to hit its full-year profit before tax target.

Argos gross margins were up around 25 basis points, which analysts at Investec (LSE: INVP.L - news) said marked the first time they had grown in the Christmas quarter in seven years.

"It would (have been) easy to get into a position where everything is on sale and everything gets cherry picked and you end up with a real profit problem and that was the challenge we tried to avoid," Chief Executive John Walden told reporters.

John Lewis, Britain's biggest department store, has said it will seek to temper the way it approaches Black Friday this year and Walden said he expected others to follow their approach by taking a more cautious approach to what goes on sale.

"I suspect what you will see is people try to be more selective about what is on sale and try to do a bit more in balancing the things that make money versus the things that may not," he said.

Shares in Kingfisher (LSE: KGF.L - news) , Europe's biggest home improvement retailer which trades as B&Q and Screwfix in Britain and Castorama and Brico Depot in France, and retailer Dixons Carphone, were both down about 1.5 percent.

(Reporting by Kate Holton; Editing by James Davey and Vincent Baby)