Lacklustre sales of London 2012 merchandise and supply problems has led the model maker to declare it will not make a profit this year.
Flat sales of Olympic products led to retailers cancelling repeat orders, which the model maker had anticipated.
The company, which owns brands including Corgi and Humbrol, also said it expects substantial manufacturing disruption at one of its key suppliers in China, where all its products have been manufactured since 1996.
Hornby said its performance would be “constrained significantly”, and the firm now only expects to break even in the 2012-13 financial year.
Last year, it made profits of £4.5m.
Hornby gained the licence to sell a range of London 2012 merchandising, including London 2012 branded Virgin Pendolinos and a Scalextric velodrome.
It said it would try to find alternative suppliers of key components in China to try to reduce the supply disruption.