Boots has been facing competition from supermarkets

It expects annual operating profits for its core Boots the Chemists chain to be in the range of �465m-�475m, while analysts had forecast �490m-�500m.

Boots said it had been prepared for a subdued market but trading since January had "deteriorated further".

Shares in Boots have underperformed the retail sector in the past year.

By the close of trade on Tuesday, its shares were down 4.14% pence at 636 pence.

Consumer slowdown

Boots has been expanding into new lines in the face of stiff competition within the beauty and health product sector.

The main cut-price challenge has come from supermarkets such as Tesco and Asda, which have strayed into its traditional drugstore territory.

Fragile consumer confidence has come through in a more significant way than we expected Richard Baker, chief executive Check the Boots share price

The Nottingham-based firm said the lower profits range reflected a slowdown in consumer spending across the High Street, where trading conditions have been tough.

Slightly higher operating costs have also affected profits at Boots, which completes its financial year at the end of February.

Customer numbers in the stores were virtually unchanged on last year, Boots said.

Trading in toiletries, healthcare and the food business had been subdued, while business at its traditional dispensing arm has remained strong.

The warning comes on the back of an increase in like-for-like sales of 2.6% over the key Christmas period.

Reality bites

The latest update is likely to unnerve retailers further after the British Retail Consortium (BRC) described last Christmas as the worst on the High Street in a decade.

This brings a dose of reality back into the market that trading out there is very difficult Iain McDonald, Numis

Leading names on the High Street such as Marks & Spencer, Peacock and Woolworths have already suffered profits downgrades after weak Christmas sales.

"I'm disappointed to have to make this announcement," said chief executive Richard Baker.

"This is a reflection of the very tough High Street at the moment. Fragile consumer confidence has come through in a more significant way than we expected."

However, Mr Baker said the company was progressing well in its attempts to become "more modern, competitive and efficient".

Analysts agreed that the update reflected tough times on the High Street.

"This brings a dose of reality back into the market that trading out there is very difficult," said Iain McDonald of brokers Numis.

"All this raises some credibility issues with Boots, but the news will rock the sector today because it must mean bad trading at the likes of M&S, Next etc., as well," added Nick Bubb of Evolution Securities.