Home Retail Group, owner of the Argos and Homebase chains, has warned of continued tough trading conditions ahead after posting a 24 per cent fall in preliminary profits.

Chief executive Terry Duddy said that despite the profit decline, last year’s performance was testament to the strength of Home Retail’s operating model and cost control.

But he cautioned: “We continue to expect a difficult trading environment for the product markets in which we operate. We remain in a position of planning cautiously in respect of the outlook for customer confidence in general and for the level of discretionary household spending.

“In addition to reduced consumer demand there are also further retail industry-specific pressures. Given the weakness of sterling, the cost of goods for the majority of home and general merchandise products will increase for virtually all UK retailers. A further area of pressure will be then likely continued cost inflation that retailers face.”

Home Retail Group reported “benchmark” profit before tax slightly ahead of City expectations at £328m for the year to February 28, compared to £433m the pervious year. Total sales fell one per cent to £5.89bn. Like-for-likes slid 4.8 per cent at Argos and 10.2 per cent at Homebase. Group gross margin declined by 81 basis points.

Multichannel sales accounted for 40 per cent of Argos’s total turnover and the internet specifically, 26 per cent.