Fashion maker People's Liberation has swung to a first quarter loss after cutting prices of its People's Liberation line as it shifts North American distribution to Charlotte Russe - but but said it is looking to start a European retail division.

Net loss for the quarter was $1.4m, down from a profit of $347,000 in the same period last year.

However, sales for the three months to 31 March increased 8.9% to US$7.5m, helped by retail and wholesale sales of J Lindeberg branded apparel.

"While we have not been immune from the effects of global recession, we have a number of brand building initiatives underway to capitalise on the popularity of our William Rast and J Lindeberg fashions," the company said.

The company said it is also looking at expanding its retail footprint and creating a new European division to directly sell William Rast and People's Liberation branded apparel in Europe.

Gross margin fell to 44.5% from 49.6% as it cleared stocks of its People's Liberation line ahead of the merchandising deal with Charlotte Russe.