Hornby has announced a pre-tax loss of \u00a310.1m and \u201clower than expected sales\u201d leading to shares plummeting by 20% this morning.\r\n\r\nRevenue at the toy manufacturer has also dropped 20% to \u00a337.5m and losses after tax rose to \u00a39.9m.\r\n\r\nA Hornby spokesperson told Retail Sector a key factor in the company\u2019s struggles was heavy discounting of stock by previous management, leading to retailers buying it at a discount which \u201cdoesn\u2019t necessarily mean its been sold\u201d. A spokesman added: \u201cThere is still stock at lower prices in distribution places.\u201d\r\n\r\nThe company also blames \u201cinsufficient investment in tooling [creating new models]\u201d which led to \u201clate placing of purchasing orders with suppliers\u201d. When asked if choppy waters on the high street were affecting Hornby, the spokesperson said: \u201cHornby is acknowledging that the retail market, is difficult, but bare in mind they have a number of different distribution centres. One of them is the independent hobbyist shops, they tend to be more robust.\r\n\r\n\u201cThe data I\u2019ve seen is that those shops are not seeing the same decline as some the other members of the retail sector, they have quite a loyal customer base. The people who go to these shops are collectors and collectors by definition are not price sensitive, they may be economically sensitive, but not as much as the people who go into an Argos or a Smyths to buy a train set for Christmas for a 10-year-old.\r\n\r\n\u201cSo with the other channel, the big boxes [complete train sets], its as tough as you would understand. But a significant proportion of its [Hornby\u2019s] distribution is in the hobbyist sector and that\u2019s quite robust.\u201d\r\n\r\nHornby CEO and interim chairman said:"In the first seven months that I have been at Hornby, we have assessed our position and confronted the reality of the situation in which we find ourselves. Tough decisions have now been taken and we are currently laying down the foundations for our future success.\r\n\r\n\u201cThere is a new energy in the business and I am excited with our plans as we re-engage across both domestic and international markets with these well-loved brands."