French Connection stunned the City yesterday when it gave warning that a marked slowdown on the high street meant that it was likely to miss profit targets this year. The fashion chain said that it was far more cautious about the “general consumer environment”, not only in the run-up to Christmas but into 2008 as well.

Neil Williams, the operations director, said: “We had a good September, but October was horrible and November has continued in the same vein.”

Shares in the group slumped by nearly 6 per cent, or 7¾p, to 132¾p, the lowest level since late September 2001, as analysts cut their forecasts for the group. Industry experts said that a slew of similar warnings were almost inevitable, given signs that higher interest rates had begun to hit consumer spending. Last week Next said that trading was “extremely volatile”, but French Connection was the first retailer to caution that the tougher conditions would hit profits.

One executive said: “My guess is we’ll see a fair bit more of this over the next three to six months.”

French Connection said in a trading update that like-for-like sales across its UK stores in the past 14 weeks were down 3 per cent. Revenue from its wholesale business also fell below last year’s levels and the weak dollar wiped out sales growth in North America. The group had hoped to beat last year’s pretax profit of £4 million this year, but acknowledged that this was unlikely. Sanjay Vidyarthi, a Dresdner Kleinwort retail analyst, cut his forecast for the group from £5.1 million to £2.1 million and brought down next year’s target by 34 per cent.

Fears of a slowdown on the high street have grown since September, when Next noted that the higher cost of borrowing had yet to put the brakes on shoppers’ spending.

Analysts said that the tone of recent trading updates suggested that retailers were as worried about their prospects for 2008 as for the run-up to Christmas. Tony Shiret, of Credit Suisse, said: “Companies are definitely beginning to be much more focused about the effects of weak demand into next year, and this will come through into forecasts fairly soon.”

Critics asserted that French Connection had struggled to win back customers after falling out of fashion a few years ago and relying for too long on its FCUK brand.

Mr Williams countered yesterday by saying that the group’s womens-wear was selling well. He insisted that shoppers had simply stopped spending. “We have nice products in the stores, but don’t feel there’s enough people out there that are happy to buy,” he said.

“Looking forward, we need to see a significant improvement over the next three months to hit our targets and, certainly, the indications are that this is not going to be the case. It may just be us, but the general trend is towards softer conditions. Look at Next – their trading has mirrored ours.”

Capital sales

— The British Retail Consortium (BRC) said that high numbers of tourists and strong demand for luxury goods had pushed up like-for-like sales in Central London by 11 per cent in October

— Kevin Hawkins, the BRC director-general, said that while retail sales had soared across the capital last month, the number of American tourists had fallen, while clothing and furniture stores had suffered a slump

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