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UPDATE 2-French Connection sells Nicole Farhi; slims in U.S.

* Sells Nicole Farhi to OpenGate Capital for up to 5 mln stg

* To close about 17 U.S. stores at cost of about 6.5 mln stg

* Says restructuring programme now complete

* Year loss widens to 24.9 mln stg; dividend slashed

* Shares up 14.3 percent

(Adds detail, COO, analyst comments, shares)

LONDON, March 15 (Reuters) - British fashion group French Connection FCCN.L is selling its loss-making Nicole Farhi brand and closing most of its U.S. stores, completing a restructuring aimed at returning it to profitability.

The group, which has previously exited businesses in Japan and Northern Europe, said on Monday its after tax losses widened to 24.9 million pounds ($37.8 million) in the year to Jan. 31, from a loss of 16.4 million in the previous year.

But businesses being kept made an operating profit of 1.3 million pounds on a 1 percent rise in revenue to 200.3 million.

French Connection shares were up 14.3 percent at 47.65 pence at 1006 GMT, valuing the business at about 46 million pounds.

Prior to Monday's update the stock had slumped 23 percent over the last 6 months, underperforming the UK general retail index .FTASX5370 by about 50 percent. Shares were changing hands for over 200 pence two years ago.

French Connection has suffered in recent years as it struggled to reposition itself after the popularity of its FCUK brand waned even before the recession started.

“The implications of the restructuring is that the business, which will largely consist of underlying UK retail and wholesale business, should be profitable in 2010/11,” said Seymour Pierce analyst Freddie George.

With French Connection restructured speculation regarding the possibility of founder, chairman, chief executive and 42 percent shareholder Stephen Marks taking the firm private could resurface.

“We are a Plc at the moment, there’s no indication that we’re not going to be a Plc... But there’s no certainty in anything,” chief operating officer Neil Williams told reporters.

French Connection said it was selling Nicole Farhi to U.S. private equity firm OpenGate Capital for up to 5 million pounds.

It will also close around 17 U.S. stores at a cost of about 6.5 million pounds, cutting its retail presence in that country to about six stores.

“We have had to make some tough decisions, but (...they leave) us with a continuing business that we expect will be both profitable and cash generative even in the current difficult economic environment,” Marks said.

Like-for-like sales at UK and European businesses that are being retained rose 2.8 percent in the year ended Jan. 31.

Williams said trading since the year-end had “continued in a similar manner with a small improvement in menswear.”

The firm added that forward orders for its UK and European wholesale business for winter 2010 had risen.

The group, which ended the year with net cash of 36 million pounds, cut the full-year dividend to 0.5 pence a share from 1.7 pence the year before. This will cost about 0.5 million pounds. (Reporting by James Davey and Mark Potter; Editing by Mike Nesbit)

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