French Connection trims losses as retail sales return to growth

Fashion retailer French Connection has narrowed half-year losses after returning to retail sales growth despite trading remaining tough on the high street.

The group reported pre-tax losses of £4.7 million for the six months to July 31, against losses of £15.1 million a year ago.

French Connection reported a 1.4% rise in like-for-like retail sales across the UK and Europe – a marked improvement on the 7% drop posted a year earlier.

But total group revenues fell 12.2% to £51 million – or 14% lower with currency movements stripped out – as it continued to trim its store estate in the face of higher rent costs and changing shopping habits.

It closed 13 company-operated stores and concessions, as well as 19 franchised and licensed outlets in the six months, leaving it with 90 and 185 respectively.

The group also said talks remain “ongoing” with a number of interested parties over the potential sale of the business and has extended the process until the end of its financial year in January.

“We believe that further time is required to bring the process to a successful conclusion,” it said.

Founder Stephen Marks, who is the group’s chairman and chief executive, said its turnaround efforts were paying off, but cautioned over ongoing “challenging” trading.

He said: “There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although our retail performance has been resilient, overall the wholesale business is strong and we continue to see good stability in the licence income.

“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.”

Mr Marks owns 42% of the retailer, while Sports Direct boss Mike Ashley holds a 27% stake.

The group’s first-half losses improved, partly as last year’s figures were hit by a raft of one-off charges, including costs from leases on under-performing stores, the House of Fraser administration, and contractual licensee debt from a client in India.

The latest interim results also show wholesale sales under pressure, down 11.7% to £27.2 million after a poor performance in the UK and Europe, where they dropped 23%.

But wholesale sales rose 12.4% in America and overall earnings in the division lifted to £4.8 million from £4.6 million a year earlier.