INSIGHT: French Connection losses lead to further cuts
- Turnover up 4% to GBP116.9m
- Pre-tax losses more than double to GBP12.8m
- Pledges more measures to stem losses
Apparel company French Connection will cut costs further over the coming six months after posting a first half pre-tax loss of GBP12.8m (US$21.2m), compared to GBP5.4m last year.
The UK-based fashion retailer and wholesaler said turnover had risen 4% to GBP116.9m in the six months to the end of July, with UK and Europe like-for-like sales up 2% thanks to strong performances from women's wear and e-commerce.
But chairman Stephen Marks admitted the company had been "severely affected" by the difficult retail conditions in all markets, weakening turnover and gross margins.
French Connection has already closed its northern European retail operations and reduced staffing levels at its head office this year, but Marks said further cost-cutting measures would follow in the second half of the fiscal year.
There's little cause for cheer in French Connection's first half results, reflected by the wider than expected losses and a 10% reduction in the company's share price in early trading today (17 September).
Some creditable top-line figures - turnover and UK/Europe like-for-likes - are undermined by pressurised margins across the group and uniform gloom around its international markets.
It's an unedifying list: North America like-for-likes down 3% despite widespread discounting to clear inventory; wholesale even worse amid retail gloom and declining forward orders; a desperate 17% slump in like-for-likes in the recently reabsorbed Japanese business.
In the circumstances, French Connection has little option but to continue what it began in the first six months of its fiscal year: cut costs across the company.
Chairman Stephen Marks signalled that the ongoing strategic review would focus on the group's international activities, loss-making business segments and central overheads.
In more concrete terms, that's likely to mean more stores closing down and more staff made redundant, following the closure of the company's northern European operations and head office job cuts earlier this year.
The hope for French Connection is that these cuts will stop the bleeding, allowing the company to focus on the few bright spots in its current operations, such as women's wear in the UK and Europe, and its successful e-commerce business.
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