Fashion group French Connection has issued another profit warning after sales went into tailspin in the first three months of the year.

The retailer reported that sales at the core UK and Europe division slumped 10% in total during the 15 weeks to May 17, when like-for-likes nosedived 12%.

French Connection reported: “The UK retail market remains particularly challenging and the combination of prevailing consumer caution and ongoing economic difficulties suggests that this will not improve in the second half of the year. 

“We therefore remain cautious about the outlook for the rest of the financial year.  Given this, it appears unlikely that our profit performance for the full year will meet current market expectations.”

At group level, French Connection’s sales fell 9.5% in the period.

The retailer said that margins had been hit by demand for discounted product during the winter Sale, but that new ranges Premium Collection and French Connection Home have both been “well received” by shoppers.

French Connection is conducting a review of its retail business and said: “We have appointed external specialist advisors to support management in this process and are working quickly towards delivering both short-term gains and long-term strategies to improve the sales densities and gross margins within our retail portfolio. We also continue to work hard actively managing our retail store portfolio including lease renegotiations.”

The UK and Europe wholesale business has traded in line with management expectations, although repeat orders have slowed and forward orders for winter 2012 are a little below the equivalent period last year.

In the US, turnover rose 11% driven by wholesale.