The City slashed forecasts for French Connection this week after the fashion retailer posted an unexpected profit warning.

French Connection’s share price fell as low as 120p immediately after the announcement before levelling at about 132.25p.

The retailer said that unless trade improved in the run-up to Christmas it would fail to match the£4 million pre-tax profit achieved last year.

“While we expect to report a profit for the year, our ability to achieve the same level as last year depends on an improvement in the general retail environment in the UK over the next three months,” said the retailer.

Retail sales at French Connection’s UK and Europe divisions fell 3 per cent on a like-for-like basis in the first 14 weeks of the second half, while overall sales rose only 1 per cent.

French Connection operations director Neil Williams said: “The beginning of November is not making us feel that like-for-likes are going to jump back up again.”

The only good news was that wholesale orders for spring/summer next year were up on last year and that the retailer’s troubled Toast business has begun to show signs of improvement. However, although sales at the US division were up 10 per cent for the period, 10 per cent of the increase was negated by the weakening dollar.

The latest update is disappointing for the retailer, which has attempted to stage a recovery after it reported a 1.6 per cent fall in like-for-likes at its first-half results in July. However, French Connection revealed that womenswear sales, which were up 6 per cent like for like in the first half, have continued to increase.

Kaupthing analyst Matthew McEachran said: “French Connection is sadly showing these recovery characteristics far too late to make any difference, with a strong headwind and weakening consumer demand still resulting in forecast cuts.”

The broker cut its forecast for this year from£6 million to£3.3 million and for next year from£11 million to£8 million.