The company warned yesterday that profits for the year to 28 January would fall to £11m-£12m, down from £14m in 1993 and short of the £16m expected by the market.
Following a strong first half and an increased interim dividend in October, the company would recommend a final dividend of 5.75p, said Keith Miles, finance director.
The set-back comes after the 226-store chain attempted to reposition itself in the market. Last year the company signalled its intention to abandon its "Romford Girl" image and move from the commodity high street market characterised by Dorothy Perkins to a more prestigious, niche position, rivalling Next and Marks and Spencer. It said it would invest some of its £13m cash in revamping stores.
Yesterday's statement confirmed fears first voiced by the company in October that demand for the new merchandise was proving patchy. The company's determination to sell stock at full prices had hit sales and, therefore, profits.
The situation was exacerbated by the disruption caused by the renovation of 60 of the 226 stores and by the warm autumnal weather. The company predicted sales in 1995 would recover strongly.
The market received the news badly, with shares falling yesterday from 201p to 183p. However, analysts were not overly perturbed, believing the company's strong balance sheet and detailed stock control would see it through.