Celebrity jeweller Theo Fennell has lost its sparkle in the economic downturn.

The luxury gems retailer, whose fans include Victoria Beckham and Sir Elton John, today plunged £840,000 into the red in the six months to the end of September as sales dropped by a fifth to £10.2 million.

In the same period last year, Theo Fennell posted pre-tax profits of £434,000.

The company attributed the loss in part to an extensive investment programme, which saw it open a concession in Dublin department store Brown Thomas and set out plans to launch standalone stores in the Middle East next year.

Chairman Richard Northcott admitted that trading has been challenging and that the group is now looking to cut costs and scale back its ambitious expansion plans.

"We expect next year to be difficult but are taking the necessary actions across all areas of the business to reduce our investment programme and cost base," he said.

The company remains in talks to sell a stake in the business to an unnamed strategic investor, but says discussions are progressing more slowly than hoped because of the economic outlook.

Founder Theo Fennell announced his split with the group in February, sparking a four-month war of words over the use of his name.