French Connection narrows H1 losses, revenues down 6.6 percent

Thursday, 18 September 2014

REPORT_ French Connection Group in its interim results for the six month period ended July 31, 2014 said that this is the third sequential half-year of improved financial performance. The group loss before taxation narrowed to 3.9 million pounds (6.3 million dollars) from 6.1 million pounds (9.9 million dollars) in 2013. However, revenue for the period was 84 million pounds (136.8 million dollars) compared to 89.9 million pounds (146.4 million dollars) in 2013, 6.6 percent lower than the prior year. At constant exchange rates, underlying revenue was 3.6 percent lower year on year, owing to the closure of non-contributing stores.

Commenting on the results, Stephen Marks, Chairman and Chief Executive said, “I’m pleased to report a further positive step forward as we rebuild value in our business. The initiatives we put in place to drive a turnaround in our trading continue to deliver an improvement in performance. Whilst costs will continue to be managed tightly, we are cautiously investing in growth opportunities, trialing new store formats and developing our international business.”

In the period 14 percent of group revenue came from the other group brands; Toast, YMC and Great Plains. Group gross margin was slightly higher at 47.4 percent. There was a strong gross margin improvement in both UK/Europe retail and wholesale due to a higher proportion of full price sales. This improvement was offset by increased discounting required in North America and the increased proportion of revenue coming from wholesale at 40.6 percent of total group revenue.

The net income received from global licensing showed a return to growth of over 3.6 percent. New licences have performed well in the period, particularly shoes and bags. Group retail revenues were 10.6 percent lower than the prior year. At constant exchange rates, the underlying decline of 9 percent was primarily due to the planned closure of non-contributing stores. In UK/Europe retail, in line with company’s strategy to drive higher full price sales, there was a significant reduction in discounting and promotional activity in the period. After adjusting for the changed discounting and promotional activity, underlying UK/Europe LFL sales increased by over 6 percent and over 1.1 percent on a reported basis.

Four non-contributing stores were closed in the period across the group: two in both the UK/Europe and North American divisions with further plans of shutting 3-4 stores in the second half.

The geographical revenue break-down is largely unchanged with UK/Europe representing 71 percent of group revenues. In UK/Europe, the combination of the positive performance in both retail and wholesale led to a reduction of 2.5million pounds (4 million dollars) in operating loss. The North America operating profit was 0.9 million pounds (1.4 million dollars). While trading conditions remain tough, the trends are seen stabilising. Company has appointed a new USA CEO who is focused on driving an improvement in the performance of the division. Rest of the World profit was lower at 0.4million pounds (0.6 million dollars). The Hong Kong JV performed broadly in line with prior year.

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