Mothercare said its performance was tracking "below expectations" after sales slipped by 2.4% in the 12 weeks through December, driven by lower footfall at its UK stores.
UK like-for-like sales tumbled 7.2%.
"In our UK business, we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end of season sale," chief executive Mark Newton-Jones said.
"We have subsequently seen good progress with strong sell through rates on Autumn winter clearance lines albeit these carry lower margins and will lead to a further reduction in full year margin as a result."
The company said that, in line with previous announcements, it had taken action to reduce its central cost base, with planned financial benefits to materialise next financial year.
"Going forward, we are not anticipating any improvement in the short-term market conditions for the UK and on this basis the adjusted group profit for the year is likely to be in the range of £1m-to-£5m," Newton-Jones said.
"Whilst the performance of the business has been challenging in the last few months, we remain singularly focussed on transforming Mothercare to be the leading global retailer for parents and young children." At 8:08am: (LON:MTC) Mothercare PLC share price was -14.47p at 47.53p