Burberry suffered its worst day on the stock market yesterday after sparking fears that the slowdown hitting the high street would spread to the luxury goods market.

Shares in the upmarket fashion label favoured by Kate Moss and Demi Moore plunged 16 per cent, or 80p, to 406.5p as Stacey Cartwright, the finance director, said that the business could miss profit targets.

Ms Cartwright said that Burberry was still aiming for profits of £210million over the 12 months to March but acknowledged that that looked a bit of a stretch. The fall wiped nearly £350million off the value of the company, floated on the stock market as a separate business by Great Universal Stores in 2002.

It came as billions of pounds were wiped off the value of retailers across the stock market.

Debenhams fell 17per cent despite positive like-for-like sales over Christmas and a second profit upgrade in the space of a fortnight from Game Group failed to prevent a 12 per cent slide. HMV, which reports on Thursday, fell 9 per cent.

Until yesterday Burberry had produced a succession of strong trading updates, fuelled by a new range of luxury handbags and strong demand from the Russian nouveau riche.

Industry experts believed that the luxury market would be insulated from the credit crunch as its customers were not as affected by rising mortgage bills. However, Burberry said yesterday that like-for-like sales growth slowed to 6 per cent in the third quarter to December 31, missing City expectations.

The retailer also admitted to a “number of glitches” in a new IT system. Ms Cartwright said: “We didn't get some product into stores on a timely basis.”

Analysts said that they were also concerned about Burberry's exposure to the US, where it generates a third of its revenue. Yasuhiro Yamaguchi, a UBS analyst, said: “We expect the cyclical slowdown to spread over time.”

Debenhams reported a 2.2 per cent increase in like-for-like sales over the four weeks to January 5 and said that it was taking market share off rivals such as Marks & Spencer. However the fall in its share price sent Debenhams down 12.75p to 63.75p, just above its lowest level since returning to the stock market in 2006.

Rob Templeman, the chief executive of Debenhams, said that he remained cautious about the outlook for the coming year and that he might scale back a store refit programme. However he was taken aback by the share price reaction.

“I'm just amazed where the share price has ended up,” he said. “Sales are up, margins are flat and market share is improving. I think it's just one of those markets.” Debenhams plans to open 20 stores over the next five years but Mr Templeman said that the group would not be following M&S into China.

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