French Connection saw profits plunge 22.5% to £3.1 million for the year to January 31.
Sales fell back to £236.1m from £241.3 million the previous year.
French Connection was hit by poor performance in its menswear business which traded 11% down like for like over the year while wholesale sales also fell back to £55.6m from £63.4m the previous year.
The consumer downturn towards the end of 2007 also affected performance.
Retail sales were largely flat at £115.6m while womenswear continued to improve and showed a like-for-like uplift of 2% over the year.
French Connection said it had addressed difficulties in menswear by appointing a new design and merchandising team but that this would not be evident in ranges until spring 09.
The young fashion brand has also seen its first improvement in wholesale sales for two years.
French Connection chairman and chief executive Stephen Marks said: “The results reflect some improvement in the performance of our French Connection ladies' wear ranges, a robust performance at Toast in the face of difficulties earlier in the year, a significant improvement in the North America business and continued tight cost control.
"These positive elements were offset by a considerably more challenging retail environment in the last quarter of the year both in the UK and the US, a decline, as anticipated, in wholesale turnover in the UK and a difficult year for French Connection men's wear.”
“The continuing difficult economic environment predicted for the new year is likely to have an impact on the rate of improvement in our retail business, but we will continue to strive for growth based on our constantly evolving fashion-forward products. Further, for the first time in two years, we are seeing some improvement in the wholesale orders in both UK/Europe and North America.
"The final outcome, however, will depend on the general retail environment in our markets.”