The firm says sales were down 35 per cent on last Christmas and although it had reduced its exposure to Woolworths from £5m to around £1m it still had affected sales.
In a statement, the firm said the financial climate had also been a factor: 'From a general perspective, we are going through a difficult trading period with new adventures and challenges coming forward each week. For example, this week has brought new lows to the banking sector which is bound to have a knock on effect in the consumer market. It would take a brave person to forecast the next few months in virtually any business arena or around the globe.
'The Group has its share of difficulties with such issues as adverse currency movements, cost of goods and services and potentially certain customers' solvency all being of paramount importance.
'However, Character is also privileged to have many trading advantages which, as a Board we believe, will hopefully help the business overcome the trading adversities which virtually every business now has to face. Whilst it is far too early in the trading cycle to be able to forecast revenues and profitability, there is no doubt that the first half of the current financial year will show a loss due to the lower sales in general, increased promotional costs and the one-off losses relating to the Woolworths account.
'This being said, the Group has maintained a strong and healthy balance sheet; remains cash positive; has no bank borrowings and has substantial unused working capital facilities available to it. Therefore we are optimistic that we are not restricted by the current financial turmoil.
'Indeed, as we look forward, Character is in a very fortunate position of having lower than customary stock levels, a programme to keep costs under control and, most importantly, a strong product offering, including many new products developed in-house.
'When Character adds its HM Armed Forces product line up for 2009 to new products for Doctor Who based on the 2010 series, the new products recently launched internationally for Scooby Doo, and the refreshed range for Peppa Pig which reached a new record level of sales in 2008 together with new ranges like Postman Pat, Hannah Montana and High School Musical, the future looks both bright and exciting.'