Seymour Pierce last week rated French Connection a sell after revising its pre-tax loss forecast for 2009/10 following a company visit.
The broker dropped its forecast loss from £3.5m to £9m.
Retail analyst Freddie George said: “The stock has performed strongly over the last quarter and is overvalued in view of the ongoing losses.”
George said French Connection would be hit by “difficult” trading in the US, where it has excess stock, as well as weakness in the dollar. The retailer purchases 35 per cent of its stock in dollars, which is hedged forward until September.
However, George added French Connection had “limited downside”. It owns the loss-making Nicole Farhi, Toast and Great Plains brands. Its underlying cash balance is £38m, an average of £20m over 2008/09, but it will decline to £35m this year.
George forecast pre-tax losses of £6m for 2010/11.