Retailer JJB Sports stunned the City today by warning that annual profits could be as much as 25% short of forecasts.

The UK’s second-largest sports retailer indicated it was on course for a full-year profits haul of around #35 million, sharply lower than the #47 million pencilled in by some analysts.

Shares touched a two-year low after diving 15% in the wake of the trading update. Sports World owner Sports Direct also saw its shares fall today.

JJB said like-for-like sales fell 4.4% in the 26 weeks to July 29, meaning profits for the first half of its financial year would be #3.5 million short of hopes at around #8 million.

The most significant impact on revenues was felt in sales of replica shirts, as the company faced tough comparatives against the World Cup in 2006.

Shirt manufacturer Umbro also warned last week of a "disappointing" take up of new England jerseys during the key summer trading period.

However, JJB said it would be "prudent to assume" that the 26 weeks to January 27 will produce a result similar to a year earlier, when profits of around #27 million were achieved.

While conditions for all retailers have toughened in recent weeks, JJB drew attention to its strategy of allowing to adidas and Nike to operate stores within JJB sites.

Richard Ratner, a retail analyst at Seymour Pierce stockbrokers, said it appeared the arrangements were "not working as well as expected".

The company remains committed to working closely with the two brands, but said it wanted to find ways to optimise their presentation within its stores.

At the same time, it is seeking to increase the proportion of "own brand products". Examples of JJB’s own brands include Olympus, Patrick and Lotto.

JJB, which operates more than 400 stores in most towns and cities in the UK, said it was in discussions with a number of brands in order to acquire their UK distribution rights, enabling it to achieve a higher proportion of its retail revenues in future from this area.

Earlier this summer, David Whelan - who set up the business in 1971 - netted #190 million from the sale of his 29% stake in the firm. He also stepped down from the board, before being appointed an honorary life president.

Mr Whelan sold his family’s holding to a joint venture formed by Icelandic financial group Exista and Chris Ronnie, who previously worked at Umbro and Sports World owner Sports Direct. Mr Ronnie became chief executive last month.