Pre-tax losses at Blacks Leisure more than doubled to £6.7 million for the 26 weeks to August 30 and the retailer said it was in talks to terminate its O'Neill wholesale licence early.
Blacks Leisure said sales over the period dropped 9% to £133 million. Group like-for-like sales fell 7.7% over the period.
Like-for-like sales fell 5.2% at the group's outdoor division, which includes the Blacks and Millets. Blacks Leisure said that this was in line with expectations due to strong comparative figures.
Like-for-like sales at the boardwear division, which includes the Freespirit and O'Neill retail chains, were down by 16.1%. The group said it was in discussions with O'Neill Europe to terminate its wholesale licensing deal early.
In the third quarter ended October 29, group like-for-like sales improved slightly, down by 0.8%. The outdoor division recorded a comparable sales rise of 4.5% over the quarter. However sales deteriorated further at the boardwear division, with like-for-like sales down by 26.6%. Total retail sales were down 3.3%.
Chairman David Bernstein said: "During the first half the group made good progress with the initial phase of the turnaround plan. The outdoor business delivered an encouraging performance against challenging comparatives and we are pleased with the performance of the new outdoor store formats, which will now be rolled-out steadily across the estate. Boardwear continues to be a very difficult market and we are examining all options for the business."
"We are encouraged by this better start to the second half and our plans for restoring sales growth to the business will be the key focus for the remainder of the current year and into 2009. The outlook for the remainder of the year will be influenced by trading over the important Christmas period and possibly, wider economic factors."
The £6.7m pre-tax loss included an exceptional charge of £2.2m relating to onerous leases and restructuring costs.