Home furnishings and fashion giant Laura Ashley today issued a profits warning after a fall in sales. It is expected to make £9.1 million for 2008, compared to the £16.1 million profit it had originally forecast.

Laura Ashley, which has a factory and a shop in Newtown and stores in Telford and Shrewsbury, reported a fall in like-for-like sales of 6.2 per cent in the last three months.

Bosses have been forced to increase promotional activity with the slide in the pound also putting pressure on profit margins. 

The company said trading had been tougher since its last update in December, with more promotions and an increase in import costs due to the weak pound. 

It added that it expected the current financial year to remain challenging and unpredictable, but said it had a strong balance sheet and would continue to seek operational efficiencies. 

Home accessories account for around 28 per cent of sales at Laura Ashley. 

The company said internet sales continued to show robust growth, up 65.4 per cent in the year but this was offset by a decline on mail order business. 

Total UK sales increased by 10.8 per cent over the year, due to an increase in selling space after 29 stores were opened and nine were closed. 

Laura Ashley shares fell more than 10 per cent today. 

Analysts at Numis Securities said the sales improvement came at a cost, with promotions over Christmas and the clearance period leaving margins an estimated five percentage points lower in the second half of the financial year.