French Connection has insisted its recovery was on track despite a near doubling of losses at its UK and European retail arm as it sold more stock on discount.

In UK and Europe, where it has 84 stores and 44 concessions, like-for-like sales increased 4.6% because of the “feel-good factor” at the time of the royal wedding and a strong end-of-season sale.

However, its operating losses increased 95% to £3.7 million after margins were squeezed by rising costs and it sold more of its stock in the summer sale. Overall pre-tax profits more than doubled to £700,000 after being boosted by strong wholesale and licensing income and a joint venture in China and Hong Kong.

Chief executive and chairman Stephen Marks said the group was “firmly back on a growth path” and was in a good position to expand overseas.

He added that the group planned to open 25 new stores in China over the next three years and further expansion in Russia, India and Turkey.

French Connection returned to profit in its most recent financial year after reviving its fortunes with a restructuring that saw it sell its loss-making Nicole Farhi brand and close its Japanese business and some stores in North America and Europe.

The shake-up left it with its UK and European retail and wholesale operations, the Great Plains wholesale-only ladieswear range and Toast, its mail-order fashion and homewares brand.

French increased its interim dividend by 20% but shares fell 5% after strong gains last week in anticipation of the results.

The group said UK consumers are still focused on quality but are increasingly searching out bargains. As a result, its end of season sale saw strong demand, even though it was run in much the same way as last year, and helped make up for some lacklustre months in the wake of the royal wedding.

It will “resist any temptation to chase the short-term gains that come from increasing our discounting” as it looks to stabilise its margin and protect the long-term future of its brand, it added.