Shares in French Connection (FCCN) fell 35% to 21.8p on Friday after the fading fashion brand ditched plans to sell the company, having finally completed its protracted strategic review.
The loss-making retailer behind namesake brand French Connection, as well as Great Plains and You Must Create (YMC), has been left hanging on the shelf. Having failed to entice a bidder, management will now focus their efforts on an increasingly unlikely turnaround.
LEFT ON THE SHELF
After completing its review, at long last, French Connection is no longer under the hammer. It has concluded it will now focus on completing its turnaround by shuttering further stores and slashing costs, including haggling down rents, while also growing the wholesale business in the US and developing its online and licensing businesses.
Back in September, the Camden-headquartered concern tested investors’ patience by yet again pushing back the results of its strategic review and formal sale process.
Mercurial billionaire Mike Ashley, whose Frasers (FRAS) has a 26.09% stake in French Connection, evidently wasn’t interested in adding another retailer to his increasingly unwieldy empire.
In 2017, French Connection came under pressure from activist investor Gatemore Capital Management to explore a sale and a shake-up the board, although enigmantic founder Stephen Marks continues to cling limpet-like to the roles of CEO and chairman.
MATERIAL LOSSES
In today’s pre-close trading update, French Connection also warned it expects to post a loss before tax of between £1m and £2m for the year ending 31 January 2020, reflecting the ‘continued challenging trading conditions on the UK high street’.
The embattled clothing and accessories seller has long struggled to fend off competition from Inditex-owned Zara, Associated British Foods’ (ABF) discount fashion chain Primark, not to mention H&M and online pure plays such as ASOS (ASC:AIM) and Boohoo (BOO:AIM).
French Connection also warned UK trading in both the retail and wholesale businesses has been ‘more difficult during the second half of the year, especially during the fourth quarter’. This included the all-important Christmas period, when apparel retail sector discounting went into overdrive.
