Waterford Wedgwood fell to historic lows yesterday after warning that weaker sales and margins would hit full-year profits. The luxury goods group said that a marginal recovery in sales ahead of Christmas had since collapsed. Sales in 2005 to date are down by an average of 11 per cent.

As a result, sales for the 12 months to the end of March are projected to be 6 per cent down on the previous year on a like-for-like basis.

Dollar weakness is likely to see turnover decline by up to 8 per cent.

"Weak demand in January, February and the beginning of March, combined with an accelerated inventory reduction programme, will substantially impact our financial results," said group chief executive Redmond O'Donoghue.

"In these circumstances, we plan to continue to address our fixed-cost base while investing in new, classic and contemporary product streams and other focused marketing programmes."

NCB analyst John Sheehan said the warning - the fifth by the company in the past two years - was particularly grim given the poor comparison with sales figures in the first few months of last year, which were not very strong in the first place.

The alert came in a year-end trading update just days after chief financial officer Paul D'Alton left the group.

"The sales decline was driven by slacker demand than hoped for," said Mr O'Donoghue. This was especially the case in the key US market, where he said the entire homestore sector was suffering.

The continuing weakness of the dollar also had an impact, he noted.

However, analysts said the dollar had, if anything, been stronger than expected in the first few months of 2005 and so should not have impacted negatively on sales.

"The board remains confident in the group's ability to successfully navigate its way through these difficult times," the company said in a statement, adding that it continued to have the support of its principal shareholders (the O'Reilly and Goulandris families).

Mr O'Donoghue said the integration of Royal Doulton was on track, and synergies from the exercise were likely to meet expectations.

The group had also reduced inventory and reduced product lines.

The company said it was assessing the steps required to return the company to sustainable profitability at current sales levels and exchange rates.

Mr O'Donoghue said announcements on what that might require would come around the time results for the full year were announced in mid-June.

Waterford Wedgwood has proceeded with a previously announced 5 per cent increase in prices on shipments from February 1st, but said it was too early to say if this would impact negatively on sales.

Shares tumbled more than 20 per cent in early trading to just three cents before recovering some ground later in the session.

At the current four cent level, the group has a market capitalisation of just €106 million.

This is barely ahead of the €100 million Waterford Wedgwood raised in a rights issue just two months ago.

Analysts said the company was in a very difficult position.

"It looks like consumers are no longer prepared to pay premium prices for its products," said Goodbody's Neil Clifford.

He acknowledged the problem was one confronting the industry as a whole and not just Waterford Wedgwood. "The problem for the company is that each time they move to tackle their cost structure, sales decline again, putting further pressure on profitability," he said.

"I'm not sure there are any quick fixes."

Analysts pointed out that with a pension deficit of around €100 million and debts in the region of €240 million, the company was unlikely to find itself an attractive takeover target.

Asked about shareholders who were nursing substantial losses on their investment in recent years, Mr O'Donoghue said: "This is a two-to-three year recovery story and it is only people who are interested in that who should stay with this business.

"I hope there are many, indeed all shareholders, who think that but I think it would be misleading to say this is going to happen overnight."