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Homebase Sales Slump On 'Lack Of Summer'

(c) Sky News 2012

There has been a sharp decline in sales at the home improvement chain Homebase, which is being blamed on the lack of summer weather.

Home Retail Group (EUREX: HOMF.EX - news) , which also owns Argos, said like-for-like sales at Homebase tumbled 8.3% in the 13 weeks to June 2.

It said the purchase of seasonal goods, such as outdoor furniture and barbeques, plunged 15% and was the primary factor for the performance.

Trading at Argos, which had been struggling, picked up over the period with like-for-like sales falling only 0.2% against analysts expectations of a 4% decline.

That compares to a fall of 8.5% in the previous quarter.

The group said business had been volatile across the business over the 13 weeks but it was currently comfortable with market expectations for full-year underlying pre-tax profit.

"We will continue to plan cautiously," said chief executive Terry Duddy.

Many British retailers are under pressure as consumers are squeezed by higher prices, muted wage growth and government austerity measures designed to cut record national debt.

Argos has been particularly hard hit because its mainly low-income customers have suffered most and because it also faces intense competition from supermarket chains, specialists and internet players like Amazon.

Gross margin was down 25 basis points at Argos and up 225 basis points at Homebase.

Home Retail shares, which have lost over half their value over the last year, rose 15% on opening today before later extending those gains.