Sunday 20 October 2019

French Connection remains in sale talks as losses narrow

The group reported pre-tax losses of £4.7 million for the six months to July 31, against losses of £15.1 million a year ago.

French Connection has narrowed half-year losses after returning to retail sales growth (PA)
French Connection has narrowed half-year losses after returning to retail sales growth (PA)

By Holly Williams, PA Deputy City Editor

Fashion retailer French Connection has said it remains in talks over a sale of the group after pushing back the results of its strategic review once again as it revealed narrowed half-year losses.

The group said it now expects the results of its sale process by the end of the firm’s financial year in January, having previously extended the review to this month.

Shares in the firm dropped 9% as it revealed falling first-half revenues, which overshadowed results showing narrowed pre-tax losses of £4.7 million for the six months to July 31 against losses of £15.1 million a year ago.

It reported a 1.4% rise in like-for-like retail sales across the UK and Europe – a marked improvement on the 7% drop posted a year earlier.

But total group revenues fell 12.2% to £51 million – or 14% lower with currency movements stripped out – as it continued to trim its store estate in the face of higher rent costs and changing shopping habits.

It appears that retail conditions will continue to be challenging Founder Stephen Marks

Revenues were also impacted by the timing of wholesale shipments into the second half, according to the firm.

It closed 13 company-operated stores and concessions, as well as 19 franchised and licensed outlets in the six months, leaving it with 90 and 185 respectively.

The group said talks remain ongoing with a number of interested parties over the potential sale of the business as it extended the process.

“We believe that further time is required to bring the process to a successful conclusion,” it said.

Founder Stephen Marks, who is the group’s chairman and chief executive, said its turnaround efforts were paying off, but cautioned over ongoing “challenging” trading.

He said: “There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although our retail performance has been resilient, overall the wholesale business is strong and we continue to see good stability in the licence income.

“The order books we have provide a clear outlook for the second half of the year in wholesale but it appears that retail conditions will continue to be challenging.”

Mr Marks owns 42% of the retailer while Sports Direct boss Mike Ashley holds a 27% stake.

The group’s first-half losses improved, partly as last year’s figures were hit by a raft of one-off charges, including costs from leases on under-performing stores, the House of Fraser administration and contractual licensee debt from a client in India.

The latest interim results also show wholesale sales under pressure, down 11.7% to £27.2 million after a poor performance in the UK and Europe, where they dropped 23%.

Wholesale sales rose 12.4% in the US and overall earnings in the division lifted to £4.8 million from £4.6 million a year earlier.

Julie Palmer, a partner at Begbies Traynor, said: “It’s clear the leadership at French Connection has a job on their hands to breathe new life in this former ‘cool’ brand.

“It’s a big ask, especially as the current retail climate shows no respect to high-profile brands, but one the company needs to undertake if it’s to relive its former glories.”

PA Media

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