March 14, 2012 / 8:23 AM / 6 years ago

UPDATE 1-French Connection looks abroad as UK disappoints

* FY profit 5 mln stg, down 32 pct, in line with expectations

* Says UK retail business performed badly, starts review

* Company plans overseas expansion

* Shares down 3 pct to 54 pence

LONDON, March 14 (Reuters) - British fashion group French Connection said a disappointing performance in the UK had led profit to slide in 2011, and that it expects its home market to remain challenging in 2012.

French Connection, whose eponymous high street clothing chain accounts for over 90 percent of its revenue, reported a 32 percent drop in pretax profit to 5 million pounds ($7.87 million) in the year to end-Jan, in line with expectations.

The company issued profit warnings in November and February, leading analysts to cut their pretax profit forecasts to a consensus of 4.7 million pounds.

“In the light of the poor performance of the UK retail division we are reviewing our retail operations in order to improve sales and margin in this core business,” Chairman and Chief Executive Stephen Marks said in a statement.

“We are very aware that there will be no quick solutions and that changes we make will take time to have an impact.”

Many British retailers are struggling as consumers grapple with inflation, muted wage growth, government austerity measures, worries about job security, a stagnant housing market and the impact of the euro zone debt crisis.

French Connection was more upbeat on its international operations and said it would expand overseas this year and open more stores in China, Hong Kong and India.

The firm ended the year with a cash position of 34 million pounds and is proposing a full year dividend of 1.6 pence.

French Connection shares were down 3 percent to 54 pence at 0820 GMT.

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