The company, however, said trade in its 137 stores in the rest of Europe had continued to improve, helping it stick to its expectations to deliver full-year pretax profit in line with market expectations, which stands at 18.5 million pounds ($22.6 million).

"Trading conditions in the UK in the first-half reflect variable consumer demand and increased competitive pressures," Chief Executive Wilf Walsh said in a trading update for the 25 weeks to Oct. 22.

The group said like-for-like sales in Britain, where it has 429 stores, fell 2.9 percent in the period. It said, however, the first stores of the 100 stores it plans to refurbish this year were outperforming other stores in the estate.

Shares in Carpetright, which have fallen 65 percent in the last 12 months, were trading at 18-year lows after the update on Thursday. They were down 5 percent at 186 pence at 0730 GMT.

Analysts at Peel Hunt said the gross margin decline, from the company's previous guidance of flat to -50 basis points, had provided a catalyst to downgrade their expectation for pretax profit for the year to 16.5 million pounds.

(Reporting by Paul Sandle; editing by Sarah Young)