Home Retail Group, owners of Homebase and Argos are releasing their interim management statement tomorrow with retail sales in April and May supposedly up due to the warm sunny weather and approaching World Cup.

The DIY and home catalogue seller has seen an eleven per cent drop in underlying profits recently, along with a double digit decline in flooring sales and weak electricals.

High promotional activity in the sector has also affected their outlook as rivals Kingfisher posted profits up 12 percent in Q1 and DSGi reported sales were up 8 per cent too.

Homebase, where gross margins are under pressure will find the increasing Kingfisher competition tough, leaving some investors wary of the shares - the value of which has fallen some 14.4 pct compared with the FTSE All-Share (-10.2 pct) over the last month:

"We remain cautious on the short term on Home Retail" said Chris Walker, analyst with Panmure Gordon.

"However the stock appears to be priced for structural weakness rather than short-term uncertainty and may represent a longer-term opportunity on further weakness" he adds, offering a 'neutral' rating on the shares with a target price of 330p.

Shares in the home retailer were up 40 pence, or 0.19 pct at 2:40 pm.