Laura Ashley has issued a profit warning after suffering in the “volatile economic climate”.

Like-for-like store sales fell 6.2 per cent in the 53-week period despite total UK store sales jumping 10.8 per cent and internet sales rocketing 65.4 per cent.

Laura Ashley said that since December, gross margins had come under pressure due to “the continued deterioration of the UK economy, its impact on the retail sector and consumer confidence, the weakness of sterling and increased promotional activity”.

It added: “As a consequence, it is anticipated that the profit before taxation and exceptional items for the year ended January 31, 2009 will be in the region of£9m, lower than current market expectations.”

House broker Numis had previously forecast£16.1m. Numis analyst Nick Coulter said: “While provisional full-year like-for-likes were well ahead of expectations, the increased activity was at a cost, with group margins now estimated to be down about 5 per cent in the second half

Coulter estimated that group gross margins declined by about 490 basis points in the second half, “which by any industry standards is big”, he said. “This reflects the impact of promotions in the key festive and clearance period and also the settlement of foreign denominated purchase invoices during a volatile period for exchange rates.”

Laura Ashley said it has a strong balance sheet and is “taking the right actions” by focusing on increasing revenue generation through its various channels, improving operational efficiencies, differentiating its product offering and investing in its store realignment programme.

The retailer trades from 228 UK shops, having opened 29 and closed nine during the year. It also has 223 franchised stores internationally and said its partners are “committed to opening more”.

The retailer added: “In line with the general economy, we expect the coming year to remain challenging and unpredictable.”

Laura Ashley will announce its full-year results at the end of March.