French Connection slumps into red
The group vowed to improve ranges, sharpen prices and close loss-making stores following a review of its UK retail business, which suffered a 9.5% fall in sales and weakened margins amid heavy discounting.%VIRTUAL-SkimlinksPromo%
Its "disappointing" performance in the UK and Europe meant it slipped to a pre-tax loss of £6.3 million in the six months to July 31, compared to a profit of £700,000 in the previous year.
With the company also expecting to make a full-year loss, it scrapped its dividend payment but said it hopes that efforts to revitalise the business will begin to pay off within two years.
Founder and chief executive Stephen Marks, who has called conditions the worst he has known in 40 years of trading, said: "We recognise that the route to sustained recovery is likely to take some time but we are committed to building on French Connection's core strengths."
Shares in the company, which also owns the Toast and Great Plains brands, were down 20% and have lost about three-quarters of their value over the past year.
Seymour Pierce analyst Freddie George branded the turnaround plan "rather underwhelming" and said he was surprised there was no major restructuring of its property portfolio. He retained his forecast of a £3 million full-year loss, adding: "Although it will be a long haul to get the company back on the recovery track we believe the business does have value."
French Connection has already said it is introducing a new range of premium womenswear exclusive to its stores and has broadened its offer to include homewares in larger stores as part of its drive to turnaround its performance.
Chief operating officer Neil Williams admitted that some of its ranges had become too expensive following price hikes in cotton in recent years and the group would use smarter buying to return more of its prices to the "sweet spot" for its customers.
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