UK: French Connection returns to growth
French Connection today booked a first-half post-tax profit for the first time since 2008 as it announced plans for further international expansion.
The UK clothing retailer said that group profit after tax for the half ended 31 July was GBP1m (US$1.5m) against a GBP12.7m loss in the same period last year. Last year's result included losses arising from the closure and disposal of certain assets.
Sales rose 7% to GBP102.8m, which the company attributed to the quality of its product range and strength of the brand. UK like-for-like sales were up 4.6% despite what French Connection described as "general weakness in the market".
Chairman and CEO Stephen Marks said French Connection plans to open as many as 25 new stores in China over the next three years under its joint venture, as well as additional stores by its franchisees in Russia, India and Turkey.
Marks said the results confirm that the company took the "correct initiatives" in restructuring the group and that it is "firmly back on the growth path".
The company said that licensing has become a "very important part of the business" and that it launched "UK Style by French Connection" in Sears stores in the US over the half.
Input cost rises, the increase in VAT and higher revenues generated during the sale impacted margins, down to 50% from 52.6% in the same period last year. However, the company said it does not expect the same level of margin erosion in the second half of the year, "having worked to mitigate the effects of the increased input prices".
Marks said that following the restructuring actions took last year, its North American business has achieved "good growth" in both retail and wholesale. However, this growth has been offset by a "weakening in consumer demand in Canada", half of its retail revenue in the region. Margins were lower in North America due to the increase in input prices.
The company's share price was down 2.9% to 100p a share at 10:52 (BST) today.
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