By  on September 16, 2008

LONDON — French Connection Group PLC saw its losses grow in the first half ending July 31, to 3 million pounds, or $5.34 million, from 1.9 million pounds, or $3.38 million, due to pressure on gross margin and inflation, the company said Friday.

All figures have been converted at current exchange.

The company said in a statement that sales remained flat, rising to 112.4 million pounds, or $200 million, from 109.4 million pounds, or $194.7 million, due chiefly to a growing women’s wear business in the U.K. and North America.

Stephen Marks, chairman and chief executive of the company, said the next six months would not be easy, but he’s nonetheless upbeat. “It would appear the economic environment is unlikely to improve in the short-term, and any gains we make will have to be achieved through significant out-performance by our ranges,” he said.

Marks called Friday’s results “disappointing,” but said in a telephone interview that he was upbeat about the future, and was counting on the brand’s bouncing back in the second half.

Women’s wear, he said, was doing well, while there was “a ways to go” in men’s wear, and the company was not expecting a recovery in that division before spring next year.

Well before the crisis in financial markets, French Connection had been struggling with declining profits and revenue.

The UK high street is a cut-throat, trend-driven environment, and brand had been losing ground to fast-fashion competitors such as Topshop and Zara.

It was also feeling the squeeze from supermarket chains, such as Asda, which compete mainly on price.

But French Connection has begun to regain some lost ground: Underlying sales of women’s wear, for instance, rose 8 percent in the UK and North America during the period.

The company has also been shifting its business from wholesale to retail concessions within department stores and absorbing franchises.

The statement said that transfer had contributed to the pressure on gross margin in the period. Gross margin fell to 51.8 percent from 53.7 percent.

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