Argos owner Home Retail Group has warned of a "challenging" few months ahead as the retailer battles to transform itself for the digital age.
Chief executive John Walden admitted customers had experienced delays and disruption while its technology struggled to cope with "extreme" online demand.
Like-for-like sales at Argos rose 0.6% in the year to the end of February, compared to 3.3% growth the year before.
DIY chain Homebase, also part of Home Retail Group, saw its growth slow too, from 5.9% to 2.3%.
It comes after the wider group surprised the City last month as it posted a sales decline at both businesses at the start of this year.
Mr Walden admitted that the five-year plan to transform Argos, now two years in, had "not enfolded exactly as we originally envisioned".
Annual results today showed the group grew benchmark pre-tax profits - stripping out one-off items and other costs - by 14% to £132.1 million, with operating profits for Argos up 15% to £129.2 million and for Homebase up 5% to £19.8 million.
Mr Walden said economic conditions had shown signs of improvement during the year with low inflation, higher employment and real terms wage growth.
He added: "We are hopeful that as the uncertainty of the general election passes, businesses and consumers will become more confident in the economic environment for the balance of the year."
However he said the group was planning conservatively for "only low levels of market-driven growth".
Mr Walden said: "Our sales performance in the first half is likely to be more challenging, as Argos focuses on improving its technology and customer experiences."
He added that it would be affected by comparisons with last year "in certain slowing technology categories and strong seasonal performances in both businesses".
"The second half should improve as we look forward to introducing new Argos digital offers in time for peak trading."
Mr Walden said a "digital revolution" was causing "disruption and change" as retailers ploughed investment into a faster-paced and more technologically-driven competitive environment.
He said the transformation of Argos had seen "minor delays and temporary customer disruption" though there had also been positives from small format digital stores and partnerships with eBay and Sainsbury's.
Mr Walden added that the drive to improve technology infrastructure had been "more challenging than originally envisioned".
He said: "Our team has faced unanticipated pressure on the resilience and scalability of existing systems due to extreme online volumes and volatility during the peak trading period."
The year saw online account for 46% of total Argos sales.
Meanwhile, Homebase saw "good progress" in a plan to reduce the number of stores by 27 to 296.
The wider group's full-year dividend increased 15% to 3.8p. Shares rose 2%.
Investec analyst Alistair Davies said results were at the upper end of expectations despite ongoing cost investments and store closures.
He said "negative trading conditions" were likely to persist in the first half but a rebound in the second half would "act as a positive catalyst".
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article