Brown & Jackson has been forced to raise money to fund expansion of its Instore format.
The retailer blamed poor high street performance, as well as omissions and lateness in Christmas ranging, for flat like-for-likes reported last week.
A£25 million rights issue will finance roll-out of the Instore fascia.
The aim is to convert 60 Poundstretchers by September and 250 within four years.
Investec analyst Mark Charnock said: 'The need to raise money shows that the downshift in profit expectations has left the balance sheet unable to fund growth.' Preliminary pre-tax losses narrowed to£75,000 on turnover of£280.3 million. Like-for-likes at the 10 Instores rose 12.4 per cent.