French Connection sells Nicole Fahri brand

The designer label - set up by Farhi and French Connection chairman Stephen Marks in 1982 - will be sold to private equity firm OpenGate Capital for up to 5 million.

A strategic review will also see loss-making stores in the US shut alongside the closure of its Japanese business and some European retail outlets.

The moves came as the group, which has stores in Hull, Leeds, Sheffield and York, posted pre-tax losses of 24.9 million for the year to January 31, up from 16.4 million the previous year.

Mr Marks said the group had "had to make some tough decisions" during the past year.

"It is sad to see the Nicole Farhi brand leaving the group, but I am delighted that its new owners are totally committed to nurturing the brand and the considerable talents of the team so that its full potential is realised," he said.

The Nicole Farhi business racked up operating losses of 5.6 million on revenues of 21.7 million last year and has been loss-making for several years.

The shake-up leaves French Connection with its UK and European retail and wholesale operations, the Great Plains wholesale-only ladieswear range and Toast, its mail order fashion and homewares brand.

The UK and European retail business achieved like-for-like sales growth of 2.8%, although this was driven by its ladieswear ranges where sales were up 4.8%.

French Connection's menswear lines have continued to underperform, although the group has seen a small recent improvement following attempts to reposition the brand through an advertising campaign.

Toast was the biggest success of the year, showing "remarkable" revenues growth of 16%. The wholesaling arm has seen "difficult" trading, but forward orders for winter 2010 are up "for the first time in some years".

"This gives us confidence that the business is returning to sustainable growth for the longer term," Mr Marks said.

He added that the changes provided a "solid base" for the development of the business and predicted a return to profit in the near future.