French Connection farewell to Nicole Farhi brings profit back

Friday, 18 March 2011
British retailer French Connection appears to have overcome its financial struggles. The smart youth fashion label reported a pre-tax profit of £7.3m in the year to the end of January, up from £700,000 before. Revenue was up 2% to £205m soon after its announcement of giving away Nicole Farhi brand.

Chairman and chief executive Stephen Marks said: “I am looking forward to growing the business.” The group made profits from continuing operations of £8.9million in the year to January 31, compared to a loss of £9m the previous year.
The boss of French Connection has declared it’s “back on track” after returning to the black. Nevertheless, Marks warned,” The current economic climate is clearly difficult and it appears likely that it will remain so in the coming year. “However, I am confident that we have the strength… to build further on the growth we have achieved.”
This followed a shake-up that saw it sell its loss-making Nicole Farhi arm, close its Japanese business and axe stores in the US. Chairman and chief executive Stephen Marks said: “I am looking forward to growing the business.”
Up to the date, and following this new strategy, the firm tripled its annual dividend to 1.5p and said future rewards would increase in line with profits. On Wednesday, the shares were up 5.81p at 125.56p, as chairman and chief executive Marks professed himself 'delighted' with the results.
'We have achieved a considerably higher profit from the core continuing operations, notwithstanding a period of major change for the Group and challenging market conditions,' he said.
The restructuring included the closure of the Japanese arm and some overseas stores as well as the offloading of Nicole Farhi. Thus, French Connection retains its European retail and wholesale business, wholesale brand Great Plains and fashion and homewares brand Toast.
The UK and Europe retail business made a loss of £1.6m last year and the company does not expect a significant improvement this year as a result of the difficult trading environment. French Connection estimated that it will put up prices by about 8% this year although margins at its UK business will drop as it absorbs some of the cost hikes. Freddie George, analyst at broker Seymour Pierce, said to British journals: “Results benefited from a strong performance in wholesaling, license income and good control of costs”.

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