REPORT French Connection Group, in its results for the six month period ended July 31, 2015 said that poor response to spring collection led to rise in loss before tax compared to the previous period. For the half-year, the company reported a loss before taxation of 7.9 million pounds (12.2 million dollars) against 3.9 million pounds (6 million dollars) reported in the same period of 2014.
Commenting on the results, Stephen Marks, Chairman and Chief Executive said, “As anticipated in our April trading update it has been a tough trading period for us and we have responded accordingly to ensure we deliver improvements going forwards. We have already closed six stores during the period, with more targeted in the second half. We have also made operational and personnel changes to drive improvements in performance. Trading however is unpredictable, and we are as ever dependent on the Christmas selling period.”
Undertakes measures to drive growth
In response to the lower than anticipated performance, the company closed six stores in the period including three in the UK/Europe and three in North America, and made operational and personnel changes across both design and merchandising.
Total 2015 revenue was 9.8 percent lower than 2014. This decline, the company said was a combination of store closures and the poor performance of the Spring 2015 collection. Composite gross margin was 45.5 percent reflecting both the higher mix of wholesale sales within the Group and discounting activity. Retail margins were not impacted significantly despite the LFL performance and wholesale margin fell slightly on the back of some additional discounts offered to clear stock.
Retail underlying loss was 11.1 million pounds (17.2 million dollars) against 7.5 million pounds (11.6 million dollars), during the same period last year. Group retail revenues were 14.6 percent lower than the prior year. The decline in revenue was due to the closure of stores and the disappointing LFLs. The Group reported in its April trading update the challenging conditions faced by the retail division and this continued throughout much of the half.
Group wholesale revenues were 2.6 percent lower than prior year. UK/Europe performed well with revenue growth of 4.7 percent while trading in the other regions more reflected the performance of the collection. The wholesale gross margin of 31.6 percent was lower by 100 basis points as additional discounting was required to clear through stock.
All geographies reported losses in H1
UK/Europe represented 74 percent of Group revenues. North America revenue represented a lower proportion of sales at 21 percent compared to 24 percent last year due to the closure of three stores in retail and the performance of the spring collection in wholesale. The UK/Europe operating loss increased to 5.9 million pounds (9.1 million dollars) due to the performance of retail.
North America operating profit was 0.1 million pounds (1.5 million dollars) due to the disappointing performance of the Spring 2015 collection in both retail and wholesale. Rest of the World operating profit was 0.2 million pounds (3 million dollars) primarily due to shipment phasing. A small loss in the joint ventures was due to challenging trading conditions in Hong Kong, largely offset by an improvement in financial performance in China.
Total reported Group operating expenses were 3 percent lower than last year. After adjusting for store closures and currency, operating expenses were 1.4 percent lower than last year.