Home shopping group Flying Brands has issued a profit warning as the Jersey-based retailer continues to struggle with rising costs and shrinking margins.

Flying Brands said that customers were switching to products with a lower gross profit margin and that product and despatch costs were higher than expected.

The group’s profits for 2008 will be reduced by£0.5m to approximately£1.4m.

In the 14 weeks to January 2, like for like sales, excluding Greetings Direct, were flat compared to the previous year. Sales at Flying Flowers were slightly ahead up 0.6 per cent, and across the rest of its brands like for like sales were down 1.2 per cent.

Flying Brands' gross cash balance was£2.3m at the year end with bank loans of£5.2m. It said that it continues to pay down its debt on schedule.