French Connection cheers shrinking losses amid improved wholesale operations
The company has reported another loss for the six months to July but said it is making progress towards becoming more profitable.
French Connection says it has made “significant steps” in returning to profit after strong wholesale operations helped half-year losses shrink by nearly 30%.
The company reported pre-tax losses of £5.7 million for the six months to July 31, compared with a loss of £7.9 million a year earlier thanks to higher licensing revenues, a “reduced loss” in its retail division, and better performance from its wholesale business.
The retailer said those improvements were achieved during a “traditionally low point in the year” for profitability and despite challenging conditions in the UK, Europe and the US.
“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,” chairman and chief executive Stephen Marks said.
“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.
“We have been working with the goal of returning the group to profitability as soon as possible and, while there is still much to do, I believe that we have made significant steps to achieve that in the near future.”
Revenue across the group fell 1.6% to £68.1 million, and fell even further when stripped of currency effects. Sales at constant currency tumbled 4.2% for the period.
While wholesale revenue jumped 7.2%, overall retail sales fell 7.5% due to store closures and a 1% drop in like-for-like sales in the UK and Europe, where there were fewer promotional sales.
French Connection has closed seven stores during the last past 12 months, including four in the first half of the year.
It added that disposing of those “non-contributing” stores had “further enhanced the overall improvement” of operations in the UK and Europe.
However, it will be opening its first new store in years in Manchester this November as part of its strategy to open bricks and mortar sites in “appropriate locations” that will “trade profitably”.
The company also used its half-year results to announce board changes, with two of its non executive directors – Claire Kent and Dean Murray – set to step down after nine years.
They will be replaced by Sarah Curran, a former managing director at Shop Direct, and Robin Piggott, the former chief financial officer of Moss Bros.
But investors seemed disappointed with the retailer’s results and directorate changes, sending its shares down nearly 3%.
Retailing analyst and consultant Nick Bubb said: “The interims today from the embattled French Connection are accompanied by a separate announcement about ‘Directorate Change’, but activist investors looking for a shake-up of the executive management team will be disappointed to see that it simply refers to two old non-execs being replaced by two heavyweight new non-exec directors.”