Laura Ashley has warned full-year profits will “fall short of market expectations” following “difficult” trading conditions in the first half of its financial year.

The homewares and fashion brand swung into the red, suffering a pre-tax loss of £1.5m during the 26 weeks to December 31. In the same period the previous year, the business recorded a £4.3m pre-tax profit.

Laura Ashley blamed the slump on lower sales of home furnishings, “revenue disruption” caused by a change in its Japanese franchise partner and the write-off of an investment in an associate company.

Like-for-like retail sales fell 4.2% during the half year, although fashion like-for-likes jumped 11.8%.

Total sales across the group fell 8.7% to £122.9m.

Laura Ashley said it cleared all of its long-term debt during the period, funded by the sale of its Singapore property.

Since the half year ended, Laura Ashley has also sold off its Manor Hotel in Elstree for £6m as the business continues to shore up its balance sheet.

Chairman Andrew Khoo said trading conditions were “difficult” during the six-month period amid “continued market turbulence”.

But he insisted that the launch of a new digital platform would “improve online sales in the years ahead” and that the business would continue its bid to expand overseas.

Khoo said: “The group is also exploring new partnership opportunities on the international front which will provide the thrust for our future growth. In the first half of this financial year, new stores were opened in India and Thailand by our franchise partners.

“In China, our online business continues to show growth. The Asian market will be a key focal point for the group’s international expansion, while we also explore opportunities in other regions.

“In our drive for international growth, we are committed to preserve the inspirational and distinctive identity of the much-loved Laura Ashley brand.

“Having eliminated all of our long-term debts, we are now better placed to deal with the current headwinds and to move the business forward.”