THEO Fennell, jeweller to the stars, said half-year sales were hit after the Olympics saw shoppers stay away from its West End stores.
The luxury jewellery retailer, whose customers have included Elton John, Victoria Beckham and Lady Gaga, said a slump in international customers during London 2012 left sales 8% lower at £4.9m in the six months to September 30.
The firm, which has a flagship store in Fulham, west London, an outlet in Mayfair and concessions in Harrods and Selfridges, said shopper footfall was badly impacted by the Games over the summer months.
But Theo Fennell, which is in takeover talks with private equity firm EME Capital, said cost-cutting efforts drove losses down to their lowest level for four years, more than halving to £610,083 from £1.4m a year earlier.
The group said it must increase sales to return the company to profit and is planning a strategy review in the new year to develop the brand and its international network.
It hopes to tap further into luxury markets across the Far East, Middle East and Eastern Europe.
The group, which sells jewellery designed by its founder Theo Fennell, who still owns 16.1% of the company, confirmed ongoing talks with buyout firm EME.
Theo revealed it was in discussions with EME in early September, which sent its share price soaring by 28% in one day.
Its suitor was recently given more time to hammer out a deal by the Takeover Panel, which extended the deadline for a firm offer to January 11.
Theo Fennell has failed to make a profit since 2007-08 and said wider economic uncertainty had been holding back its international expansion plans, as talks with potential partners have been taken longer than expected.
Rupert Hambro, chairman of Theo Fennell, said the group remained cautious over its Christmas trading period.
Theo Fennell sells jewellery at prices up to £250,000 or more per piece, while it plans to launch a new diamond collection next spring.