High Street chain Laura Ashley has warned that its profits will miss their target because of disappointing Christmas sales.

The current retail market backdrop makes forecasting unusually difficult Laura Ashley statement

The retailer said that trading in both clothing and home furnishings had been lower than expected.

The store was one of the first to start its sale, before Christmas, and the heavy discounts meant that its profit margins were squeezed.

The company's announcement sent shares falling 18% to 7.75 pence but they recovered some ground to end down 13% at 8.25p.

The news from Laura Ashley followed a profit warning from the electronics retailer Dixons, which also reported poor Christmas sales.

But there was slightly cheerier news from fashion chain Next.

Its sales grew by a better than expected 1.7% and it said its profits would be on target.

Breaking even

Laura Ashley said that in the six weeks to 4 January total sales increased by 6% in stores that were open at the same time last year.

But while home furnishing sales increased by 11%, women's fashion sales fell by 2%.

In continental Europe, clothing sales were even worse, falling 3%.

The company is shutting down some of its French and German stores and said it had to discount goods in those earmarked for closure.

In a statement Laura Ashley said: "The current retail market backdrop makes forecasting unusually difficult."

But it said it expected profits for the year to the end of January to be at break-even level.