* 2008 sales fall 1 percent, Q4 sales down 1.2 percent
* Eastern European exchange rate impact on earnings unclear
* FY sales in Germany down 6.9 percent
* Shares hit seven-week low
(Adds details on performance in eastern Europe)
By Eva Kuehnen
FRANKFURT, Jan 8 (Reuters) - German home improvement chain Praktiker missed its 2008 sales target and abandoned its profit forecast, hit by the recession in Europe's largest economy and weaker currencies in several eastern European countries.
Praktiker shares, which have lost 42 percent in the past six month, fell as much as 17.8 percent to a seven-week low and were trading at down 15 percent at 6.16 euros at 1119 GMT.
DZ Bank analyst Herbert Sturm said in a note: "We expect short-term pressure on the stock due to a further looming slowdown in growth in eastern Europe in the first half of 2009."
Germany's second-largest home improvement chain after Tengelmann's OBI said on Thursday, full-year sales fell 1 percent to 3.91 billion euros ($5.33 billion), of which it generated a third outside Germany.
It had initially targeted a low-single-digit full-year growth rate and did not reiterate its forecast for earnings before interest and amortisation (EBITA) of 135 million to 140 million euros, saying "no precise prediction of earnings could be made yet".
It was still unclear to what extent changes in eastern European exchange rates against the euro would hit earnings, the company said.
Praktiker operates 100 stores outside Germany, mainly eastern Europe, where sales slowed in the fourth quarter compared with the rest of the year due to sharp falls in the local currencies against the euro. Praktiker reports its sales in euros.
In Romania, for example, where Praktiker has 25 stores, the leu currency has fallen about 17 percent against the euro since October.
A trading update by Germany's biggest listed retailer Metro on Tuesday, which is among the most exposed to eastern Europe among European retailers, may shed further light on how much exchange rates have hurt the sector.
In Germany, lacklustre demand and fewer 20-percent discount days drove Praktiker's 2008 sales down by 6.9 percent.
German unemployment rose by a bigger-than-expected 18,000 in December, the first increase since February 2006, official data showed on Wednesday.
Praktiker trades at about 7.5 times projected 2009 earnings, at a discount to Europe's top home improvement retailer, Kingfisher -- which runs market leaders B&Q in Britain and Castorama in France -- and U.S. peers Home Depot and Lowe's Companies Inc.
In contrast to its peers, Praktiker owns only a fraction -- about 1 percent -- of its real estate, which makes it less appealing to investors looking for safety in times of uncertainty, analysts said.
Praktiker is due to report full-year earnings on March 27.
(Editing by Erica Billingham)