Takeover target Home Retail says poor sales at Argos to hit profit

LONDON, Jan 14 (Reuters) - British retail takeover target Home Retail (Other OTC: HMRLF - news) reported a worse-then-expected 2.2 percent drop in like-for-like sales at its biggest chain Argos, hours after its said it was in advanced talks to sell its Homebase chain for 340 million pounds.

Home Retail, which supermarket group Sainsbury (Amsterdam: SJ6.AS - news) 's wants to buy, said during December Argos suffered a 13 percent reduction in traditional walk-in sales, and a 10 percent increase in digital sales was not enough to compensate.

Analysts had expected like-for-like sales at Argos to rise by 0.3 percent in the 18 weeks to 2 Jan.

Home Retail said its benchmark profit before tax for the financial year ending February would be around the bottom of the current range of market expectations of 92 million pounds ($132.66 million)to 118 million pounds.

Like-for-like sales at DIY chain Homebase rose 5 percent. It said late on Wednesday it was close to selling Homebase to Australia's Wesfarmers. ($1 = 0.6935 pounds) (Reporting by Paul Sandle; Editing by Sarah Young)