UK fashion chain French Connection continued to disappoint as it reported first-half profits had plummeted 68.5 percent and adjusted expectations for the year. The company said that its wholesale order book for Winter 2005 and Summer 2006 fell 15 percent below what it was this time last year. Wholesale sales in the UK and Europe represent approximately 34 percent of total turnover.

In July, French Connection said that profits for the year would fall almost 40 percent below the mark of previous years, warning that it would realise £20-£25 million in pre-tax profits, down from £33 million last year and analysts' expectations of £30-£35 million. Turnover dropped 8 percent to £117.9 million. Meanwhile, operating profits plunged 71 percent to £4.7 million. "The business has faced a challenging six-month period during which the retail environment in the UK has continued to worsen," said founding chairman Stephen Marks. Retailers' experiences are divided. Primark, the discount retailer, is thriving while chains like Next continue to struggle.

French Connection's poor performance prompted speculation of a possible takeover or of Marks taking the company private. On Tuesday shares in the company soared more than 16 percent when Baugur, the Icelandic retailer that owns high street brands like Oasis and Karen Millen, acquired the second largest stake in the company, behind Marks who owns 42 percent. Media reports state that Baugur increased its stake in the company to 9-10 percetn, up from almost 3 percent. It is believed to have purchased shares worth almost £18 million. Although Baugur's stake is believed to be passive, there has been speculation that the company regards the brand French Connection UK as old and ready to be axed.