Argos owner Home Retail said yesterday it may need to increase a provision by up to £30m (€38m) to compensate financial services customers who were overcharged, taking the shine off its best quarterly trading report for two years.

British takeover target Home Retail reported improved trading at its Argos stores and a bigger-than-expected cash pile yesterday, a week before a deadline for bids.

The Irish operations of UK retail giant, Home Retail, Argos and Homebase, both incurred losses last year.

Home Retail, the biggest household goods retailer in Britain, warned on its profit outlook yesterday, blaming uncertainty ahead of the Christmas trading period and increased investment at its Argos chain.