Does the weak trading update from Argos this morning say more about the business or the market?

Home Retail Group, the parent company of Argos and Homebase, issued a first quarter trading update this morning, and while the performance of Homebase - down 1.4% like-for-like - was OK, group chief executive Terry Duddy will be very disappointed with the 8.1% like for like decline at Argos.

The company said that the weak video games market and slower television sales accounted for two-thirds of the overall decline. There’s certainly a growing body of evidence - from Game and HMV among others - that the gaming craze has well and truly passed, but it’s surprising to see TV sales slowing ahead of the World Cup, even if it was against strong comps.

I do think some of Argos’s problems are of its own making, particularly as Homebase managed to keep big ticket sales flat. While Argos has done a brilliant job in multi-channel - although its existing model did lend itself to it - the experience of shopping there isn’t always a great deal of fun. Perhaps more than any other retailer, it is vulnerable to supermarkets’ incursions into selling general merchandise, as shoppers are already in the supermarket buying their groceries and there is a lot of overlap in terms of what they sell.

But I suspect the sales decline is also a reflection of how tough the market is, with spending on discretionary goods being held back by growing consumer caution. This is one of the first major trading updates to cover the period since the election and it shows that there is an awful lot of uncertainty out there. I don’t hold out too much hope that the emergency budget in a fortnight will do a great deal to improve consumer sentiment.