Lakeland, the kitchen and homewares specialist, famous for its innovative gadgets, suffered a profits fall last year as the shock of Lehman Brothers’ demise holed consumer sentiment.

The retailer posted a 7.8% sales rise to £134.8m in the year to December 31, 2008. Although gross profit edged up, pre-tax profits fell from £6.3m to £4.2m. Over the year the retailer increased capital expenditure as it opened new shops but cut its debt and cash flow was positive.

Director Julian Rayner, one of the three brothers that own the business, said that like other retailers Lakeland’s trading declined in the aftermath of Lehman’s fall – just ahead of the year’s key trading period.

He said that trading this year had improved and had been especially strong since July.

Lakeland wants to double the size of its store portfolio within the next five years, expanding from 40 to 80 shops. It is relocating its Cardiff store to the St David’s Centre.