Shares in embattled fashion brand French Connection (FCCN) fell 12.6% to 33.2p as the retailer reported a material first half sales plunge and continuing losses.
There's also a warning that ‘retail conditions will continue to be challenging’ that adds to the gloom.
The Camden-headquartered company also tested investors’ patience by once again pushing back the results of its strategic review and formal sale process.
TESTING INVESTORS’ PATIENCE
Almost a year ago, French Connection announced it was reviewing ‘all strategic options’, including an outright sale of the group. The strategic review and formal sale process was originally expected to conclude during the first half of 2019.
But on 28 June, the date was delayed until today.
Now, French Connection says talks are ‘still ongoing with a number of parties’ and insists more time is needed. This means the process is now forecast to be concluded by the end of its current financial year.
READ MORE ABOUT FRENCH CONNECTION HERE
French Connection was founded by enigmatic chief executive officer (CEO) and chairman Stephen Marks in 1972. Its brands include the namesake French Connection label and its controversial FCUK abbreviation, as well as Great Plains and You Must Create (YMC).
The retailer has struggled in recent years amid competition from cheaper fast fashion rivals and with fresher fashion and accessory brands in the ascendancy.
HELD BACK BY WHOLESALE
Results for the half ending 31 July 2019 revealed a 12.2% drop in group revenue to £51m, reflecting ongoing store closures and a shift in the timing of wholesale shipments into the second half of the year.
French Connection enjoyed good growth in the USA amid progress with departments stores such as Bloomingdales and Nordstrom, yet wholesale revenue fell 11.7% to £27.2m as ‘certain larger customers in UK/Europe’ deferred shipments to the second half of the year.
Positive takeaways from today’s results include the fact French Connection is still on track to meet full year expectations.
UK and Europe retail like-for-like sales edged ahead 1.4% despite the ‘difficult trading environment’, while underlying pre-tax losses reduced from £5.5m to £5.3m. Furthermore, licence income grew by 4% to £2.7m thanks to another strong performance from its expanded range with furniture purveyor DFS (DFS).
‘There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK,’ explained Marks, ‘although our retail performance has been resilient, overall the wholesale business is strong and we continue to see good stability in the licence income.’
Marks added: ‘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.’
