French Connection turns a corner, but still posts a loss
UK fashion retailer French Connection has recorded another massive loss – which overshadowed a milestone improvement in underlying profit.
For the full year to January 31, the company’s operating loss almost tripled, from £3.8 million (US$4.97 million) the previous year to £9.3 million ($12.2 million).
However for the first time in seven years, French Connection’s achieved an underlying profit, a somewhat modest £100,000 which was a stark contrast to the previous year’s £2.1 million loss.
In what the company described as a “tough” trading environment, sales fell 10.6 per cent overall, or by 6.8 per cent on a like-for-like basis, to £58.4 million.
While figures were not released for the brand’s Hong Kong sales, the company said shipments to its partners there and in Australia reduced during the year.
The company is continuing to close stores. During the last five years it has reduced its store count by more than half, and currently has 96 standalone stores and 195 franchised and licensed stores worldwide. Nine more are slated for closure this year.
However, wholesale sales rose 10.3 per cent to £76.9 million in the UK, Europe and North America, which drove group revenue up by 0.2 per cent year on year to £135.3 million.
“I am pleased that we have achieved our target of returning the group to underlying profitability this financial year,” said CEO Stephen Marks.
”This is only part of our overall journey, however it represents a significant achievement given the results over recent years.
”This has been achieved despite the ongoing difficult retail trading environment in the UK and is the result of the changes we have made in all areas of the business to adapt to the ever evolving markets in which we operate.
”While we still have a way to go to return the business to an appropriate level of profitability, I believe that we have made and continue to make significant progress.”
GlobalData senior retail analyst Sofie Willmott said French Connection’s “more subtle brand handwriting fails to stand out” against more distinctive players such as Ted Baker, Reiss and Whistles, which all have a clear design direction.
“To return to like-for-like growth, French Connection must give consumers a clear reason to shop with the brand by refining its range,” she said.
“French Connection has got a hard slog ahead. As consumer confidence is expected to remain low this year, the retailer must better define its brand identity and point of difference to both convince a buyer it has future growth potential, and to attract shoppers back.”
Marks said talks are continuing on a potential sale of French Connection.