TEA and coffee specialist Whittard of Chelsea is bracing itself for a difficult Christmas after reporting a 3.9 per cent fall in sales over the past 20 weeks.

The company warned shareholders it remained cautious about prospects, even though the sales figure was slightly better than the 4.1 per cent decline reported last month.

Chairman Richard Rose repeated a warning last month that its business may continue to come under pressure during Christmas.

He said: "Given the current retail environment, it is difficult to forecast what the sentiment will be over the all-important Christmas period - I must therefore remain cautious about the outcome for the current year."

Whittard has been hit by a downturn in visitors at its stores, while the impact of the July 7 bombings in the capital also caused potential takeover parties to walk away in the summer.

Discounting by competitors has also led customers away from its 127 outlets.

Difficult trading last Christmas was said to be a major factor in profits for the year to May falling by 29 per cent to £2.3m.