Karstadtquelle's sales have been feeling a little deflated this year

Analysts said the news could fan fears about the outlook for Europe's largest economy, as domestic demand is one of the main drivers of growth.

A report on Tuesday showed that export demand may already have dipped, putting extra importance on consumer spending.

Karstadtquelle shares fell by almost 11% to 15.56 euros in Frankfurt.

Mixed bag

Germany's largest department store company, Karstadtquelle reports its profits in a form known as EBITDA, or earnings before interest, taxes, depreciation and amortisation.

The company said it now expects EBITDA to rise by 10% this year, a growth rate that would be only half its previous forecasts.

On a group basis, the company was not doing too badly and it posted a net profit of 558.1m euros (�227m) in the six months to the end of June, compared with a loss of 271.9m euros in the same period a year earlier.

However, much of that profit came as the company sold off stores and property to trim its debts.

Growth depends on the purchasing thirst of consumers and companies

Separately, the retail division's earnings are much less rosy, with the department store unit posting a loss of 36.1m euros and the mail order business booking a shortfall of 52.6m euros.

The company's total first-half sales fell to 6.5bn euros from 6.8bn.

There were signs of recovery and the company said a revamp of the mail order business should pay dividends later this year.

Karstadtquelle also said that its Thomas Cook travel agency "is outperforming the market".

The company, which operates 92 department stores and another 45 sports stores across Germany, is often seen as a good barometer for the state of the nation's consumers.