French Connection Losses Widen, Investor Urges Sale

French Connection
Photo: Courtesy of French Connection

French Connection reports its full year financials amid uncertainty about the company’s future.

The retailer, which operates is namesake brand along with Toast, Great Plains and YMC, reported a 6.7 percent drop in revenue to 153.2 million pounds, for the year ended January 31. Revenue for the previous year was 164.2 million pounds.

French Connection’s underlying operating loss was 3.7 million pounds, compared to a 4.7 million pound loss in the yea prior.

The British retail group’s five-year battle to regain profitability has prompted investor Gatemore Capital to call for either a sale of the company or a break up of its licensing and retail businesses. This latest plea from the investor comes after months of public criticism, including accusations that the retail operation is failing to take investors’ best interests into account, according to The Telegraph.

French Connection is among the many fashion brands struggling to compete with faster, more agile chains like Zara and Asos. The weakness in the pound following the Brexit decision is also plaguing the business, which imports much of its product from overseas.

Chief Executive Stephen Marks sees improvements in retail in the EU and UK, but says wholesale and licensing are dragging numbers down, according to Reuters.

Retail revenue dropped 4.9 percent in the year to 87.9 million pounds, which French Connection attributes to store closures. In an effort to turn things around, the retailer has closed 37 of its full-price stores since 2013, and plans to trim the fleet to 30 by 2019.

Same store sales at UK and EU stores increased by 4.4 percent, based on better collections, merchandising and buying. Ecommerce increased 12.7 percent and now makes up 27.3 percent of revenue compared to 23 percent the previous year.

Off price sales outpaced full-price as the full line store count decreased, resulting in a gross margin of 56.8 percent vs. 57.3 percent last year.

Wholesale revenue dropped 9.1 percent to 65.3 million pounds, and gross margin dipped to 30.9 percent from 32.2 percent in the year prior on clearance sale activity.

Gatemore’s managing partner, Liad Meidar, says profitability could occur as soon as 2018.

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