French Connection has bleak year, but sees signs of recovery
French Connection is “moving in the right direction once again”, the company told us on Wednesday as it delivered its full-year results for the period to the end of January.
The under-pressure fashion retailer was "significantly impacted" by the pandemic during the year with revenue plunging over 40% to £71.5 million. It had been loss-making before the pandemic, but the £2.9 million underlying loss it made in the previous financial year widened to £11.7 million this time, “driven by the significant decline in sales, additional one-off stock provisions, offset by cost reductions across all areas”.
Operating profitability fell in all geographic regions with the UK/Europe loss widening to £5.8 million from £1.6 million, North America profit down to £1.1 million from £5.5 million and the Rest of the World contributing a loss of £0.9 million, slightly worse than the £0.8 million loss a year earlier.
So the bad news the company has been delivering for some time clearly continued. But there were some signs of an upturn too. For instance, wholesale revenues fell 33.1% to £49 million, “with customers particularly impacted during the first national lockdown” But “UK online customers performed strongly in [the] second half”. Wholesale was helped in the UK by “a higher proportion of customers within the client base with strong e-commerce propositions”.
However, retail was very weak. Retail revenues dropped by an even wider 51.8% to £22.5 million, due both to store closures and to low footfall when shops were open. However, alongside this, online sales rose 7.1%, helped by casual clothing and homewares.
Gross margins were hurt by “both the loss of the full-price selling periods during national lockdowns and higher levels of residual stock at the period end”.
During the year the store portfolio was predominantly closed for 21 weeks. When it reopened, trading, particularly in the important Christmas period post-November lockdown, was considerably below last year. In addition, a further 14 locations (seven stores and seven concessions) were permanently closed during the year. As expected though, there have been a number of more favourable rental deals as leases have come to an end.
Chairman and CEO Stephen Marks said the company “worked with our key stakeholders to stabilise the business and secure new financing” and that “trading had been broadly in line with our expectations at the time of the financing, but we were then hit by the second and third national lockdowns in the UK”.
But he’s “pleased that the wholesale business in both the UK and USA has bounced back, even with the continued uncertainty and lockdowns. E-commerce sales are growing with the Summer collection selling very well”.
He also said that with store reopenings in the UK this month, “we are seeing a much better sales performance than we experienced at the end of the first national lockdown, although it will take time to see how quickly things develop over the coming months, in our own stores but also for our wholesale customers. Overall though I feel that we are definitely moving in the right direction once again”.
That’s clear from the current orders for the summer and winter seasons. They “represent a good bounce-back to previous levels reflecting the strength of the collections and provide us with a solid start to the new financial year”.
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