Fashion group Mosaic has revealed total sales fell 1.2 per cent over the 23 weeks to January 3 and said that it expects full-year profits to be below last year.

The fashion group, which is in talks with lender Icelandic bank Kaupthing to secure the future of the group, said profits would be diluted following the collapse of the bank and the subsequent loss of its foreign exchange hedge.

The retailer, which does not report like-for-likes, revealed that gross margin rose 60 basis points over the 23-week period and it ended the period with 30 per cent less stock.

In a statement Mosaic, which operates brands including Karen Millen, Oasis and Warehouse, said: "The key Christmas trading period started slowly, however strong reactions to our strategic promotional activity in the lead up to Christmas drove sales successfully."

E-commerce sales soared 71 per cent over the period and international sales rose 15 per cent.

The retailer said the collapse of the Icelandic banking system has “generated significant challenges” during the period and that the withdrawal of credit insurance as a result put pressure on creditors.

It said that management have addressed the situation and worked with suppliers to ensure delivery of goods to normal terms.

Chief executive Derek Lovelock said: “Despite the recent economic slowdown felt by retailers generally and the impact of the Icelandic banking crisis, which has uniquely affected Mosaic, our results remain encouraging. This is due to the excellent performance and hard work of our teams, the support of our suppliers and partners, and the strength of our brands.”