French Connections product must be more consistent in design and quality

French Connection's product must be more consistent in design and quality

French Connection needs to make its product more consistent in design and quality, one analyst has said, after the troubled fashion retailer recorded an annual loss of GBP4.7m (US$6.7m). 

The UK company today (15 March) said its underlying operating loss, which excludes net gain/loss on store disposals and closures, amounted to GBP3.5m for the year to 31 January, compared to a loss of GBP800,000 in the prior year period. 

Total net loss amounted to GBP3.5m, steeper than last year's GBP1.6m loss. 

Revenue fell 8% to GBP164.2m, due to a combination of store closures, poor retail performance in the first half and a decline in North America wholesale. 

Retail revenue fell 10.6% to GBP 92.4m, hurt by the closure of 13 non-contributing stores and negative like-for-like sales in the first half. Although UK/Europe like-for-like sales were down 6.4%, they did improve in the second half of the year (-2.4%), compared to the first half (-10.7%). 

French Connection said this reflects an increase in full price selling offset by a change in promotional activity, as well as improvements from changes in design and merchandising put in place in the first half.

Wholesale revenue dropped 4.5% to GBP71.8m. 

Group gross margin dropped to 46.3% from 46.7% last year, reflecting the higher mix of wholesale sales within total revenue. 

"Overall the performance for the year has been disappointing due to the very poor first half but the improvement we have seen during the second half and into the new financial year shows that we are definitely moving in the right direction," said chairman and CEO Stephen Marks. 

"The reaction to this year's collections has been strong so far showing that we are on track. We are early in the year and have a considerable amount of work to do to take the group back to profitability although I believe that the actions we have taken to date will go a long way to taking us there."

Separately, the company has tapped Asos executive Lee Williams as its new group finance director, effective 4 April. 

Verdict Retail analyst Nivindya Sharma believes the appointment should help the retailer address its operating costs and restructuring, but noted: "French Connection is a long way off from announcing a recovery, with poor product at the heart of its problems."

"Product must be more consistent – both in design and quality – to sustain the minimal gains it has made in the second half of 2015. Ranges must be differentiated and price points must provide value for money, otherwise the mid-market will continue to steal footfall and market share."