French Connection sank into the red for the first time in 14 years today after its FCUK logo and marketing campaign featuring a lesbian kiss turned off shoppers.
The struggling fashion store posted pre-tax losses of £3.6 million for the six months to the end of July compared with profits of £5.1 million in the same period last year.
It came as sales at its stores plummeted from £117.9 million to just £111.2 million, with retail experts blaming a tired image and over-priced clothing.
French Connection chairman Stephen Marks said: "The challenges we faced during the last financial year have continued to impact trading in the new year.
"It has taken longer than hoped to translate the changes we have made in our business into sales growth."
But despite the disappointing first-half performance, French Connection said today that sales were now picking up following improvements to the autumn and winter collections and a continued shift away from its use of the once popular FCUK logo.
Operations director Neil Williams said the new season had "started well", with like-for-like sales up 9% in the last three weeks. He forecast like-for-like sales for the whole second half to be up 3%.
Mr Marks said the company would continue to focus on the quality and price of its clothing.
"We recognise that in the past we have not met our customers' expectations. However, the strong initial reaction to the new winter collections indicates that our efforts are having an impact," he said.
"We will keep on working to improve our ranges and all operational aspects of our business.
"The indications are that we are beginning to achieve our goals, with sales in the early part of the new season encouragingly ahead of last year."
French Connection has been forced to issue three profits warnings in the past two years but said today that its full-year results "will meet our expectations".
City analysts have pencilled in full-year profits of £4 million despite the first-half losses.
Last year, pre-tax profits fell 53% to £15.7 million amid declining sales and criticism that its clothes were overpriced and unoriginal.
The chain ditched the FCUK logo from much of its marketing and clothing as sales declined but admitted it failed to win back customers with its controversial lesbian kiss advert.
The television advert came amid a major marketing blitz and showed two well-dressed women kung-fu fighting in a basement before they kissed.
Launched under the logo "Fashion versus Style" in February, the campaign drew complaints from viewers and was referred to the Advertising Standards Authority.Reuse content