Home Retail Group (HRG), Britain’s biggest household goods group, defied fears of a slump in spending on big-ticket items over Christmas after reporting resilient trading at its Argos chain.

Despite poor trading at its Homebase DIY outlets, HRG was still able to announce that full-year profits will be “towards the upper end of market forecasts”.

However, Terry Duddy, chief executive, gave warning that the anticipated consumer slowdown is now more evident and said: “It is obvious that sales growth in the short term will be harder to come by.”

HRG's shares, which have fallen 45 per cent since May, rose more than 5 per cent in early trading, up 13.7p to 284.7p.

Like-for-like sales at Argos, the catalogue retailer, fell 0.2 per cent in the 18 weeks to January 5, in line with analysts’ forecasts, while gross margins remained flat, in contrast to expectations of a fall.

The company said strength in video games, satellite navigation equipment and mobile phones was offset by weakness in jewellery and toys, while the furniture and homewares market remained difficult.

Like-for-like trading at Homebase fell 6.3 per cent over the same period, against forecasts of a 2.8 per cent dip and marking a significant slowdown on the 2.5 per cent drop reported at October’s half-year results.

However, a 2 percentage point rise in gross margins provided reassurance that Homebase’s overhaul of its supply chain is starting to pay off.

HRG is forecast to produce pre-tax profits in the 12 months to March 1 in a range between £382 million and £423 million, with a consensus of £407 million.

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