Home Retail Group, the owner of the Argos and Homebase chains, warned that it faced a 10 per cent increase in the cost of buying in goods, which would hurt profits and force it to raise prices after going into the red last year.

Home Retail said the increase in the second half of this year, which it believed was in line with the market, came from the weakness of sterling, which pushed up buying costs, offset by flat-to-falling prices in local currencies and lower shipping costs.