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Fashion chain French Connection has warned it is likely to report lower annual profits this year, unless the UK's retail environment improves.

In a statement today the company confirmed that its overall sales levels were lower than expected in both August and October and that its recent experiences had caused it to be "more cautious about the general consumer environment for the last quarter and into next year".

Amid warnings about its potential prospects given the current environment on the high street, the clothing retailer revealed that its like-for-like sales had fallen by three per cent during the first 14 weeks of the second-half.

The company said that despite a "volatile" period of trading, sales of its women's wear had continued to grow on a like-for-like basis. French Connection also stressed that its mail-order-based ladies fashion range, Toast, was showing improvement.

However the high street chain said that revenue for its wholesale business in the UK and Europe is below the level reported for the same period of last year, reflecting a drop in forward orders and the transfer of some business to its retail division.

But French Connection added that forward orders for the spring and summer of 2008 are ahead of last year.

Meanwhile the group said that its retail business in North America had seen "continued improvement", yet confirmed that higher like-for-like sales in the region would be compromised by the ongoing decline of the dollar against the pound.

Looking ahead French Connection warned: "While we expect to report a profit for the year, our ability to achieve the same level of profit as last year depends on an improvement in the general retail environment in the UK over the next three months."

The company is the latest retailer to warn about difficult conditions on the high street, with others having previously warned that the impact of past interest rate rises is beginning to hit consumer sentiment.