Loss for French Connection as it unveils plan

Marion Dakers
SHARES in French Connection tumbled eight per cent yesterday after it swung to a loss for the half-year and admitted that trading “continued to be very difficult”.

The retailer recently completed a review of the business, pledging yesterday to focus on improving store operations, altering its product range and closing underperforming outlets.

Chairman and chief executive Stephen Marks conceded that the turnaround plan “is likely to take some time”, with the effects not felt for around two years.

“We are not expecting any improvement in the UK retail trading environment in the second half of the year,” the firm added.

The retailer reported a £6.3m pre-tax loss for the six months to 31 July, compared to a profit of £700,000 a year ago.

This was in line with forecasts, following three profit warnings from the company over the last year.

Group revenues fell seven per cent to £96m, while heavy promotions ate into gross margins, which fell by 2.3 percentage points to 47.7 per cent.

Performance in the UK was even worse, with revenues falling 10 per cent to £67.1m.

French Connection’s North American business posted a small rise in profit to £1.3m, despite an eight per cent drop in revenues and the termination of a licencing deal with Sears department stores.

Forward orders for winter 2012 and summer 2013 are around 10 per cent behind a year ago.

Andrew Wade at Numis said the firm’s plans “look to be a sensible series of initiatives”, though any improvement in sales will not feed through until next year.