The owner of UK retail chains Argos and Homebase has forecast annual profits above hopes after good trading in the last couple of months, although it warned markets were likely to stay under pressure.

Home Retail, which has 50,000 staff, expects group benchmark pre-tax profit in the year to March 1st to be slightly ahead of the top end of market expectations of between £107m and £111m.

It said its cash outflow for the year also would be a touch better than previous guidance, resulting in net cash of about £330m.

The group, which has been trying to make the most of its shops and online operation by offering click-and-collect services, said Argos like-for-like sales in the eight weeks to March 1st rose 5.2% to £526m.

Sales of electrical products stayed positive mainly due to growth in video gaming, TVs, small domestic appliances and white goods.

Sales of the chain's other products were broadly flat year-on-year apart from jewellery, which fell slightly.

DIY chain Homebase boosted sales by 9.3% to £203m as the UK's housing recovery lifted demand for big-ticket items such as kitchens and furniture.

Outgoing Chief Executive Terry Duddy said: "Although there are signs that economic conditions may be starting to improve, we will continue to plan for a subdued consumer environment."

PW

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