Reporting flat profits of pounds 6.1m for the six months to September, the retailer frequented by Patsy and Edina in the television series Absolutely Fabulous, said sales had continued to weaken and that its profits would now fall below those of last year.
"The general problem is a lack of consumer confidence," said chief executive Joseph Wan. "People are reading bad news in the paper every day about redundancies and factory closures. There is no `feel-good factor' to encourage them to spend."
Although "Harvey Nicks" is protected slightly from the worst effects of the slowdown because of its wealthier customer base, it seems these customers are still making small economies. "They need to see something they really like before they go ahead," Mr Wan said.
Robert Carruthers, of the clothes industry magazine Drapers Record, said the dearth in wealthy Asian visitors was a factor in Harvey Nichols losing its fizz.
"The dramatic depreciation of the value of sterling and then the real economic downturn, especially in Japan, has meant a reduction in tourist spending," he said. "The Japanese were big spenders right across the luxury end of West End retail."
Harvey Nichols' warning is the latest in a series of gloomy statements from Britain's hard-pressed high street. Other downbeat announcements have come from Marks & Spencer; Storehouse, the Bhs and Mothercare group; and from Arcadia, the clothing retailer that includes Burton Menswear, Principles and Dorothy Perkins.
Yesterday's cut in interest rates was helpful, Harvey Nichols said, but it would take a long time before customers return to their routine of buying designer clothes and accessories. "I think it will be difficult in the early part of next year and the mark-downs in the sales will be greater," said Mr Wan.
"But hopefully it will pick up later and with the millennium celebrations, the feel-good factor might return."
The grim news on trading forced the company's shares down to 116.5p, their lowest point since the group came to the stock market nearly three years ago.
The group's fashionable Oxo Tower restaurant on the south bank of the Thames in London managed to boost sales, however. A second London restaurant is due to open in the first half of next year in Leadenhall Street in the City of London financial district.
Harvey Nichols has also announced plans to build a third store. It will be in Edinburgh. Its second store is in Leeds.