French Connection posted a smaller half-year loss of £3.9million today as the fashion chain took a further step on its drive to rebuild the business.

The improvement from £6.1m a year ago in the six months to July 31 was the third half year of progress in a row after like-for-like sales in its UK and European division jumped 6% on a year earlier.

It significantly reduced discounting and promotional activity in the period by not holding a mid-season sale, while the summer sale was put back by a week and lower levels of mark-down were used.

The chain, which has 128 stores and concession outlets in the UK and Europe, said it was on track to meet full-year profit forecasts.

Chairman and chief executive Stephen Marks said: “I’m pleased to report a further positive step forward as we rebuild value in our business.”

Mr Marks has also closed under-performing stores, grown online business and employed a new design team in a bid to end a long run of losses.

He added: “Given the very competitive market place and tougher comparatives in the period, we remain cautious about the second half where, as ever, we are dependent on the very important Christmas trading period.

“We expect the results for the full year to be in line with market expectations.”

Freddie George, a retail analyst at Cantor Fitzgerald, believes the company is on track to break-even in the current financial year.

He said: “The company’s strategy, in our view, now has traction particularly in the UK and Europe.

“There is more clarity on pricing architecture between the ‘good, better and best’ ranges particularly in womenswear, the accessories assortment has been strengthened, there is a better focus on the ‘best sellers’ and there has rightly been a significant reduction in markdown activity.”

The company also has a North American division which made an operating profit of £900,000.