French Connection issue profit warning

Friday, 18 November 2011
High street retailer French Connection has issued a profit warning that its sales in 2011 are unlikely to meet expectations. According to the Financial times, shares in the struggling fashion company fell 18 per cent on Thursday after management  revealed that poor sales of its winter ranges had caused turnover to fall almost 10 per cent in the past three months. As a consequence, pre-tax profits in its third quarter will be £1.8m lower than the same period last year.

The company said in a statement: “The UK fashion shopper continues to act very cautiously and, in addition, the unseasonably warm weather has had a negative impact on sales of our winter ranges.” Like-for-like sales in its European retail business declined 9.5 per cent in the three months to November 16, compared with the same period a year before.

The group expects trading in December and January to rise – after the success of its summer sale – as unsold inventory is cleared at a discount, but accepts this will not recover the shortfall.

French Connection’s wholesale business saw revenues rise 6 per cent in the period, and the group said forward orders for its summer 2012 ranges were “well ahead” of last year. It said its operations in North America and Asia “continued to perform well”.

Freddie George, retail analyst at Seymour Pierce, viewed the sales slowdown at French Connection as “disappointing”, but added: “Sensibly, management did not respond by discounting its ranges,” noting it had maintained its full-price stance.

Seymour Pierce has downgraded its full-year pre-tax profit forecast from £10m to £7m and removed its buy recommendation on the stock.

French Connection shares lost 13p and were trading at 60p by mid-afternoon in London.

Image: French Connection Fall 11

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