Shares in fashion and furnishings group Laura Ashley plunged nearly 20 per cent on Wednesday after it warned it would fail to hit its profit targets following poor sales over the crucial festive trading period.

The operator of 460 outlets in 24 countries said same-store sales in the six weeks to January 4 rose six per cent thanks to a strong performance from its home furnishings business which offset a two per cent slip in women's clothing sales.

But the company said margins were lower than expected as it was forced to slash prices to shift stock, especially in mainland Europe.

Laura Ashley said it now expects earnings before tax and exceptional items for the year to January 25 to be around break-even. City experts had forecast a pre-tax profit of £5.9 million.

"As a result of this disappointing performance over the key Christmas period, it is now anticipated that the group's trading results will be substantially lower than current market forecasts," it revealed, adding lower margins were "due to unexpectedly high levels of discounting and a change in the product mix in home furnishings".

In September, the company posted a second quarter pre-tax loss of £200,000 compared to a profit of £2.4m in the year-ago period and added same-store sales in the eight weeks to September 21 were flat.