Struggling baby products retailer Mothercare has issued a profit warning after seeing sales slide over the crucial Christmas period.

Clearly this is an unacceptable performance Ben Gordon, Mothercare chief executive

The company said like-for-like sales - which strip out the effects of new store openings - fell by 1.1% in the 13 weeks to January.

It added that "the lower than forecast sales... will result in a trading outcome for the current year worse than expectations."

The announcement sent Mothercare shares down 17% in earyl trade on Tuesday to their lowest level in almost two years.

The stock closed down 14p, or 14%, at 86.5p.

Back to basics

The fall in sales came despite Mothercare saying it had sorted out the problems at its distribution depot in Daventry.

The warehouse system failed to work properly when it was introduced, leaving stores with the wrong stock at the wrong time and badly denting the company's profits.

The warehouse problems meant stores were running out of stock in the run-up to Christmas in 2001.

But Mothercare said the problem last month was that many people were holding back on spending money until the New Year sales.

"Clearly this is an unacceptable performance," said chief executive Ben Gordon, who joined Mothercare in December.

"My priority is to fix the retailing basics and I am currently undertaking a fundamental review to improve performance in every aspect of what we do.

"It will take time to get right but I believe there are some great strengths in the business and that Mothercare has a unique role to play as a specialist retailer."