Britain's Home Retail, owner of Argos general stores and the Homebase do-it-yourself chain, posted a 24 per cent drop in underlying full-year profit today and said trading conditions would stay tough.
Profit before tax and one-off items was £328 million ($478 million) in the year ended February 28th, above analysts' median forecasts.
"Looking ahead, we continue to expect a difficult trading environment for the product markets in which we operate,” Home Retail said, adding a weaker pound and rising costs meant it would have to raise prices, make savings and limit investment.
Sales fell 1 per cent to £5.9 billion, while the full-year dividend was kept at 14.7 pence a share.
Including an exceptional charge of £694 million, mostly related to a non-cash asset write-downs at Homebase, Home Retail made an operating loss of £402 million.
Home Retail said it was making changes aimed at delivering annualised cost savings of about £50 million, of which £35 million will be achieved in 2009 to 2010. It also plans to cut capital spending below last year's £132 million.
Home Retail shares have approximately halved in value over the past two years, but have outperformed the DJ Stoxx European retail index by about 25 per cent over the last 12 months, helped by the group's lack of debt.
The firm had net cash of £284 million at February 28th.
Argos sells more than 18,000 products from over 700 stores which are set out in twice-yearly catalogues which the firm estimates adorn coffee tables in two thirds of British homes.