Shares in Home Retail Group (HRG) fell 8.6% on Thursday despite trading subsidiaries Argos and Homebase reporting positive trading in the latest quarter.
The high street toy and gadget retailer achieved revenues of £828 million in the 13 weeks to June 1, a 1.2% rise on the same period a year earlier.
The company said demand for consumer electronics such as tablet computers and television sets and continuing strong sales of white goods had more than offset a decline in the video games and audio categories.
Meanwhile, the firm’s DIY chain posted a 0.2% improvement in total sales in the period to £422m but HRG admitted the weather-affected performance was “slightly behind” its own expectations for the business.
Chief executive Terry Duddy said he expected customers to remain cautious in their spending habits in the months to come.
He said: “Argos has delivered a good start to the year driven by continued success in consumer electronics and electricals, supported by growing internet and mobile commerce sales.
“Overall, its trading has been consistent with our expectations.
“Homebase produced a positive like-for-like sales performance, however, seasonal sales were adversely impacted by the volatile weather and as a result its performance for the quarter was slightly behind our expectations.
“Whilst we expect consumer spending to remain subdued, we are on track with delivering our investment plans to drive the long-term development of both Argos and Homebase.”
Operationally, the group completed a refinance in the period by securing a new three-year £165m revolving credit facility.
Actuaries also completed a full valuation of the group’s defined benefit pension scheme in the quarter which resulted in a £158m deficit being identified.
The group has committed to making deficit recovery payments of £22m per annnum in each of the next seven years.
Scott Dacko of Warwick Business School said: “If they can further their efforts in supply chain management and data analytics to a point where they are able to respond even faster to unexpected developments affecting consumer demand such as the weather, they will be in even better shape.”
Shares in HRG ended the day at 131.10.