Hobbs said the credit crunch and interest rate increases had dented consumer confidence, which led to lower than anticipated retail spending. But chief executive Nick Samuel said he had "absolute confidence" in the strength of the Hobbs brand.
Samuel said: "We are committed to making further improvements to the customer proposition to ensure a solid performance and the readiness to take advantage of opportunities as the markets improve. We will continue to develop and invest to maximise our performance in the UK and internationally," he added.
The retailer said gross profit margin had improved due to the negotiation of better bought in costs and a clear focus on stock control and maximising full year sales. Sales from Hobbs' transactional website, which launched in November, have exceeded expectations and will be level with its largest store after a year.
Hobbs also moved its distribution centre last year which impacted on its results.
Hobbs trades from 113 UK stores, including concessions and outlets. It plans to open a further seven stores and five concessions this year.