French Connection declared itself the latest victim of the consumer slowdown yesterday, revealing that it made a loss of £3.5m during the first half of the year. The retailer said its losses were up by more than a third on the £2.5m loss it suffered in the same period last year.
Neil Williams, French Connection's chief operating officer, said certain areas of the business were performing well, with 8 per cent sales growth in its womenswear ranges in the UK and North America, for example, but the good news was sparse.
The figures were in fact boosted by a one-off property disposal worth £1.9m, and the company conceded that it had seen "increasing pressures on our margins and cost base". Mr Williams added that the fall in the value of sterling was an additional concern as the group sources much of its stock in euros and dollars.
However, despite an increasing number of economists predicting that the UK economy is heading for recession, Mr Williams said he was confident that the group would meet its broker Numis's prediction that the full-year figures will show a profit of £500,000, which includes the property disposals. The second half of the financial year is always stronger, he pointed out, largely on the back of stronger Christmas sales.
Nick Coulter, an analyst at Numis, said: "We see scope for optimism with a strong performance in womenswear and the new menswear design team now firmly in place. With substantial net funds French Connection has the luxury of time to pursue a sales-led turnaround, making the stock an option on recovery."
Other experts were less bullish on French Connection's prospects for the full year. Sanjay Vidyarthi, an analyst at Dresdner Kleinwort, warned that yesterday's numbers were below expectations and that it may be a tough task to recover from the slow start.
"We think French Connection will be lucky to break even at the PBT level this year. We think that French Connection is fixable but, as management acknowledges, the scale of recovery required is formidable in the current environment."
French Connection's shares closed down 1.5 per cent at 64.5p.