LADIES' fashion favourite and home furnishings company Laura Ashley warned it would slump into the red after dismal January trading left it short of targets for the second time in as many months.

The clothing and home furnishings group said expectations for the financial year to January 25 were now for an underlying loss of about £5m.

In January, Laura Ashley set its hopes on break-even after a poor Christmas trading season meant it would miss market hopes of profits of £6m.

Shares fell by as much as 16 per cent - down 1.25p to 6.5p - following the warning.

The group blamed the latest disappointment on lower sales and margins in January.

And with more stock left at the end of the financial year, the firm has taken a higher write-down on stock.