UK clothing retailer Fat Face moved to a profit and booked higher sales in its last fiscal year – but has issued a cautious outlook on the year ahead as Britain prepares its exit from the European Union (EU).

For the 52 weeks ended 28 May, earnings amounted to GBP16.9m (US$20.6m) from a loss of GBP710m a year earlier. Operating profit, however, declined 8.2% to GBP33.5m as a result of the weak pound, the company said in its just-published annual report.

Fat Face saw strong sales over the 2015 Christmas period, helped by its full price stance, despite strong discounting across the clothing sector and softer autumn and spring periods for the group. As a result, net sales reached GBP220.4m from GBP205.18m a year earlier.

Retail sales grew 7.9% to GBP219.2m, while like-for-like sales increased by 1.8%. The retailer opened its first stores in the US in its last fiscal year, with three now trading across New England.

"While market conditions have continued to be challenging, the group has returned a good year of revenue growth, development of the brand (both in the UK and the US) and investment that will support the group in the longer term," said chairman Lord Rose. "However, a combination of unseasonal weather, customer reaction to product and adverse foreign exchange movements have impacted results."

Looking ahead, the UK public vote in favour of leaving the EU may create uncertainty, the company said, which could impact the UK retail industry.

"The group has robust contingency plans in place. Short term foreign exchange movements have been predominantly mitigated through hedging for the next 12 months. Overall, the outlook remains challenging," it added.

Charlotte Pearce, associate retail analyst at GlobalData, believes that with trading still tough in 2017, Fat Face must focus on improving its instore experience and invest in more innovative visual merchandising in order to boost dwell time and conversion.

She adds: "Fat Face's success with its festive price promise, which continued in 2016, highlights how shoppers see value for money in the retailer's full price proposition. However, with price rises inevitable this year, Fat Face will need to emphasise its quality and design credentials to justify price hikes and maintain appeal."