French Connection losses narrow, strategic review extended
Fashion retailer French Connection posted a narrowing of its interim losses on Tuesday but a drop in revenue, as it said the strategic review and formal sale process have been extended until the end of the year.
In the six months to the end of July, the operating loss from continuing operations narrowed to £3.7m from £5.5m the year before, even as total group revenue fell 12.2% to £51m. The company pointed to the ongoing reduction of the store portfolio and a shift in timing of wholesale shipments into the second half.
Retail revenue was down 12.8% during the half to £23.8m, while wholesale revenue declined 11.7% to £27.2m.
While it achieved continued good growth in the US, this was offset by the shift in sales for the UK/Europe division from the first to the second half of the year, French Connection said.
It said major customers in the UK continued to grow their orders overall, despite the general trading conditions, particularly those with online operations, both pure play and multi-channel. In the USA, good progress was made with the department stores, especially Bloomingdales and Nordstrom.
The company said its strategic review and formal sale process, initially expected to conclude in the first half, have been extended until the end of the year.
"As announced on 28 June, given the active ongoing discussions, we extended this process to now. We believe that further time is required to bring the process to a successful conclusion and expect the process to be concluded by the end of our current financial year," it said.
Chairman and chief executive Stephen Marks said: "I am pleased that the changes we have made to the business over the last few years continue to move us forward.
"There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although our retail performance has been resilient, overall the wholesale business is strong and we continue to see good stability in the licence income. The order books we have provide a clear outlook for the second half of the year in wholesale but it appears that retail conditions will continue to be challenging. Underpinned by these results we remain fully on track to achieve our expectations for the financial year."
French Connection did not recommend the payment of an interim dividend as it opts instead to retain current cash reserves to support the turnaround of the business.
At 1215 BST, the shares were down 8.3% at 34.85p.
Julie Palmer, partner at Begbies Traynor, said: "These results demonstrate the loss of appeal French Connection has experienced in recent years with revenue falling by more than 12%.
"The company seems to have fallen out of fashion with its target audience and the once radical retailer appears to be searching for a brand identity - which is key to the success in a fickle fashion sector.
"Pricing also appears to be out of step with competitors, and its strategy of selling through concessions and third party online channels has taken away some of its identity and exclusivity. It’s clear the leadership at French Connection has a job on their hands to breathe new life in this former ‘cool’ brand.
"It’s a big ask, especially as the current retail climate shows no respect to high profile brands, but one the company needs to undertake if it’s to relive its former glories."