Chairman and CEO Stephen Marks said he is "confident" that the retailer will see a good performance during the rest of the year

Chairman and CEO Stephen Marks said he is "confident" that the retailer will see a good performance during the rest of the year

British fashion retailer French Connection Group says it is moving in the right direction as its losses narrow in the first half of year, but admits there is still much to do as one analyst warns it must engage with lapsed customers to fend off competition from the likes of Zara and Asos.

Losses amounted to GBP5.7m (US$7.96m) in the six months ended 31 July from GBP7.9m a year earlier, an improvement of GBP2.2m at what the retailer called a "traditionally low point in the year" for its profitability. Group gross margin narrowed to 45.7% from 46%, as a result of wholesale making up a larger proportion of group sales.

Group revenue was down by 1.6% to GBP68.1m from GBP69.2m, with the improvement in wholesale offset by a reduced store portfolio.

Overall retail revenue slipped 7.5% in the period to GBP38.5m. French Connection said the decline was primarily driven by the reduced store portfolio, reflecting the net seven stores closed during the last 12 months and resulting in a 10.2% reduction in average group retail trading space, coupled with broadly flat like-for-like sales.

Meanwhile, the retailer continues to see progress in its e-commerce business, which now represents 29.2% of retail sales, compared to 26.5% in 2016. However, sales growth has been held back to some extent as French Connection has reduced the level of sale and clearance product available on the site to promote full price sales.

Mobile comprises 45.4% of e-commerce traffic, up from 36.4% last year, and accounts for 31.0% of transactions.

"We have definitely seen momentum build in the first half of the new financial year with improvements across all the divisions despite difficult trading conditions," said chairman and CEO Stephen Marks. "With full price sales in retail up during the early part of the second half, combined with the strong winter 17 order books in wholesale and very strong reaction to the spring 18 collection, I am confident that we will see a good performance during the rest of the year."

The retailer also revealed it has appointed Sarah Curran MBE, the co-founder of online fashion business to the board alongside former finance director of Moss Bros Robin Piggott. The pair replace Claire Kent and Dean Murray.

Zoe Mills, retail analyst at GlobalData, notes French Connection remains plagued by declines in its retail division.

"The retailer's inability to achieve like-for-like growth in its UK/Europe division is a disappointment. The expected closure of just three stores this year does not go far enough, given that its current portfolio clearly still lacks destination appeal."

Mills says more must be done to achieve profitability in the second half. "Investment in product is slowly paying off, but it must better emphasise quality and value for money to justify its premium positioning if it is to drive full price sales in Q4 2017, when discounting is rife on the high street.

"With the festive season soon upon us and French Connection's strength in partywear, its performance should improve over the coming months. However, remaining focused on delivering a unique design-led collection, as well as engaging with lapsed customers that have been enticed by cheaper alternatives from Zara and Asos, will be essential."