Ann Summers has reported a loss of £3.6m for the full year to June 28, 2014, compared to a profit of £1.7m in 2013.
Turnover fell to £101m from £115m in 2013, while gross profit was £65m compared to £71m during the previous year.
Chief executive Jacqueline Gold said: “Last year was a challenging one for Ann Summers, particularly given the amount of change in the business and the difficult trading environment.
“This is due in part to the underperformance of certain parts of the business, which we have since recognised and addressed, and in part to the structural changes and investment we have made to secure future growth and success.”
During the year, Ann Summers invested £1.5m in new systems and processes for its Party Plan business, which it said proved to be more disruptive than planned for the whole company.
It also invested £1m in the refurbishment of five stores. It will roll out the refurbishment plan across the remainder of its stores over the next three years.
The company operates 141 stores in the UK, in addition to its Party Plan, online and wholesale businesses. Its sister company Ann Summers Ireland operates three retail stores.
Gold said: “We will continually review our retail portfolio over the coming months and years, making decisions to close loss-making stores and making strategic investments in new retail spaces that we believe will drive the business forward.”
She added the company had taken “decisive action” across all channels to ensure growth and profitability returns quickly, and forecasted a “healthy profit” and “significant growth” next year.
The company’s web platform is set to trade internationally from autumn 2015, while new partnerships with eBay, Amazon and Asos.com are expected to bear fruit.
Last July Ann Summers made three of its directors redundant as part of wider changes to its top team. At the time the retailer said the restructure would help develop the business for the future and “maximise its potential”.