Britain's biggest electronics retailer Dixons has compounded fears of a slowdown in consumer spending, after reporting Christmas sales were lower than it had hoped.

The company dealt a double blow by issuing a profit warning along with its figures.

The consumer is beginning to feel a lot less confident in a very different political and economic environment John Clare, Dixons CEO

"Trading in the UK over the Christmas period has been below our forecasts," said company chairman Sir John Collins.

Investors took a dim view of the figures - Dixons shares ended the day 21% lower at 116.5 pence, the worst performer in the FTSE 100 index.

The sales figures appeared to confirm recent surveys suggesting that British consumers held on to their money in the run-up to Christmas, amid concerns over a weaker economy and a possible war with Iraq.

Wider implications

Dixons, which also runs the Currys, PC World and The Link retail chains, blamed weak sales of games consoles, audio products and extended warranties for much of the disappointment.

The worm has turned Yaron Meshoulam, 20/20

But it also warned about the wider implications of its poor performance.

Chief executive John Clare told BBC News 24: "Our market has quite often been a bellwether for the mood of the consumer."

Dixons' performance was not "anything we were doing wrong", he added, but more a sign of weaker consumer spending habits.

"The mood of the consumer is beginning to change and change quite quickly.

"The consumer is beginning to feel a lot less confident in a very different political and economic environment," Mr Clare told the BBC.

Annual hit

Sales were up just 1% in the eight weeks to 4 January.

The company also reported its figures for the six months to 9 November, when comparable sales rose 5%.

But it said the poor Christmas and New Year performance would have ramifications for its annual profits.

What we don't want to do is talk ourselves into another recession Conrad Rowland, Retail Dynamics

"We therefore expect that the results for this financial year will be below current market expectations," said the chairman, Sir John.

Consumer jitters

A number of surveys around Christmas raised fears that 2002 had been a disappointing year for retailers.

The marketing group Footfall suggested pre-Christmas sales were down 7% on last year, but recovered to show a strong jump in sales shopping as canny shoppers waited for cut-price offers.

And the employer's organisation, the CBI, said last week that sales in the run-up to Christmas had been slower than a year ago, for the first time in 10 years.

Some analysts took Dixons' performance as proof that the much-heralded slowdown in consumer spending had arrived.

"The worm has turned," said Yaron Meshoulam at the 20/20 research consultancy.

"People have been listening to the Chancellor and realising things are not going to continue on the boom side and so are pulling back," he added.

However, more upbeat market watchers warned against reading too much into the statements.

"What we don't want to do is talk ourselves into another recession, " said Conrad Rowland, a director at Retail Dynamics.

"There wasn't anything particularly exciting for Dixons to be selling," added Mr Rowland.