UK: French Connection slides to H1 loss
- Pre-tax loss of GBP6.3m, compared to GBP0.7m profit
- Revenues down 6.6% to GBP96m
- UK/Europe retail revenue down 10%
Fashion retailer French Connection has admitted it endured a “very difficult” first half’s trading after announcing a pre-tax loss and revenue decline.
The UK company, which launched an extensive review of the business in March this year, posted retail revenues down 10% in the UK and Europe, although there was growth in North America and in licensing income, as well as “solid” performances from the Rest of the World and its Asian joint ventures.
Gross margin was impacted by increased discounting in the company’s stores, falling 2.3% to 47.7%, French Connection said.
“The last six months have continued to be very difficult for French Connection’s UK/Europe retail business, which has had an impact on the group results for the period,” said Stephen Marks, company chairman and chief executive.
Marks said the company had implemented “a set of detailed initiatives” following the review of the business, aimed at improving store operations, developing the product offering and improving merchandise management.
He said he remained “confident” that the measures would prove effective over the next two years, but admitted: “We recognise that the route to sustained recovery is likely to take some time.”
Neil Saunders, managing director of Conlumino, believes "the main issues for French Connection are all front of house.
"On product it is simply not hitting the right notes in a consumer market that has become more selective about fashion and is thinking more about the product being purchased. Collections are not innovative or engaging enough to stimulate consumer interest and there is a sense that the brand is rather stale and has lost its way."
He adds that against the backdrop of a market that has become far more competitive and crowded, French Connection is "looking increasingly colourless" and has had to resort to discounting its "too high" prices in order to shift lines.
"There is much work to be done to put this right and, fortunately, management does seem to recognise some of the challenges with the results of its recent review focusing on areas like shop design and product.
"However, this will not deliver immediate dividends; if the changes are successfully driven through the business it will be a matter of years, not months, before financial rewards can be reaped."
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