Sales of Olympic merchandise failed to win gold for Hornby.

In a gloomy trading statement to the Stock Exchange today, the Broadstairs-based hobby specialist said they were lower than forecast.

Demand before London 2012 had been strong and consumer purchases encouraging, it said. But major retailers had also bought large quantities of merchandise from other licensees.

“Faced with lower than expected sales, the major retailers resorted to deep price discounting.

"The consequence of this for Hornby was that retailers lost confidence in many categories of London 2012 merchandise, and repeat orders for our products were cancelled.”

Hornby was also hit by disruption of supplies from China after a major supplier “rationalised” its manufacturing facilities.

“This process is ongoing and it is now clear that the disruption to our supplies for the remainder of the financial year will be substantial.”

Hornby said it had made progress to diversify its supply base in China and also in India.

It revealed that its major supplier accounted for 75% of purchases but this had since been cut to below 35%.

“The current disruption is part of a painful process but we believe that, working with all our suppliers, we will be able to work through this process to arrive at a more balanced supply base for the future.”

The company also said that the “challenging” economic background had depressed consumer spending and retailers continued to buy cautiously.

It warned that it would not achieve its financial forecast and said it expected to break even for the financial year ending March 2012.

However, Hornby had a strong balance sheet, with net debt on August 31 of £7.8m compared to £14.3m a year earlier.