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Shares in Homebase owner Home Retail Group plunged after the company admitted this morning sales at the DIY chain have worsened.

In the 13 weeks to May 31st 2008, like-for-like sales at Homebase fell 12 per cent, a weaker performance than the company had anticipated. In response, shares in the retailer fell 7.71 per cent by mid-morning.

The group's catalogue retailer Argos reported flat like-for-likes, compared to a 1.9 per cent gain in like-for-likes in the final quarter of the last financial year.

Homebase like-for-likes fell 5.3 per cent in the 13 weeks to March 1st – showing sales are now falling at a faster rate.

Terry Duddy, chief executive of Home Retail Group, said: "As highlighted at our recent full-year results, Argos has begun the year in line with our expectations overall, with a resilient sales performance being driven by lower margin consumer electronics categories.

"Homebase's initial trading period was weaker than anticipated, with sales impacted by poor weather conditions. While the consumer outlook remains challenging, we approach it from a position of both financial and operational strength, and at this early stage our expectations for the full year are unchanged."

Home Retail Group had predicted a weaker outlook for Homebase, as consumer confidence remains low. Recent surveys from Nationwide and GfK NOP have shown the majority of consumers think now is a bad time to make a major purchase.

In addition, a slowing housing market means there is less demand to redecorate properties.

The fall in its share value over the last quarter has led to the retailer being ejected from the FTSE 100 in the index's quarterly review.