French Connection gets back on track with narrower losses in H1FY17

The struggling British retailer is starting to see the light at the end of the tunnel as operating losses start to narrow down. Over the first half of the year, Fashion Connection's operating loss came in at 5.7 million pounds, down from previous period’s 7.9 million pounds.

On the upside, wholesale revenues grew by 7.2 percent - 2.6 percent at constant currency - while the licensing sector also yielded positive results: income was up 8.3 percent in the six months to July, 31.

Meanwhile, operating losses across the retail business unit withdrew by 18.3 percent. ‘City A.M.’ highlights that while UK and Europe like-for-like retail sales were broadly flat, there was an improved margin rate due to fewer promotions. On the bad news department, the group’s revenue slipped by 1.6 percent (4.2 percent at constant currency) to 68.1 million pounds.

“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,” said Stephen Marks, chairman and chief executive.

More changes for Fashion Connection along the road

Looking ahead, the company’s CEO remains positive, saying that “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.”

The owner of the Toast, French Connection and Great Plains brands has been struggling to keep at pace with fast-fashion moguls such as Zara or H&M, finding itself forced to close stores, renew its executive team, and put up with belligerent activist investors.

To the latter point, back to March, activist investor Gatemore Capital urged the troubled retailer to split itself, spin off its Toast brand, look for a new owner, or find a financial partner. Finally, the equity firm got rid of its entire stake in July, saying it was not satisfied with the pace of change at the fashion retailer.

In the interim, Sports Direct’s owner Mike Ashley has built up a 27.04 percent stake in French Connection, becoming the second-largest shareholder in the company and getting the industry talking about their rather obscure reasons to make such a move.

On Tuesday, the company announced more changes to the Board of Directors, as Claire Kent and Dean Murray will join as non-executive directors. Both bring to the table extensive experience in the sector (As the co-founder of mywardrobe.com, Curran’s domain expertise lays on e-commerce; while Piggott most recently spent six years as finance director of Moss Bros Group.)

Commenting on the news, 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.”

Photo:French Connection, Web