French Connection manages to narrow losses in H1

For the six month period to July 31, 2017, French Connection Group’s operating loss was 5.7 million pounds (7.7 million dollars) against loss of 7.9 million pounds (10.6 million dollars) reported in the first half of 2016, an improvement of 2.2 million pounds (2.9 million dollars). Total half-year revenue of 68.1million pounds (92.1 million dollars) were 1.6 percent lower than the previous year, which the company attributed to a reduced store portfolio.

Commenting on the results, Stephen Marks, the company’s Chairman and Chief Executive said in a statement: “We have definitely seen momentum build in the first half of the new financial year with improvements across all the divisions despite difficult trading conditions. With full price sales in retail up during the early part of the second half, combined with the strong winter 17 order books in wholesale and very strong reaction to the spring 18 collection, I am confident that we will see a good performance during the rest of the year.”

Financial highlights of the first half performance

Wholesale revenue grew in both the UK and North America with overall growth of 7.2 percent or 2.6 percent at constant currency. The company said, overall retail sales reduced by 7.5 percent or 8.7 percent at constant currency due to a reduced store portfolio with a UK/Europe LFL performance of negative 1 percent due to a lower level of promotional sales this year.

The reduced store portfolio, the company said, was following the closure of four non-contributing stores in the first half, and net seven non-contributing stores in the past 12 months; a reduction of 10.2 percent in average group retail trading space. Full price sales performed well with the seasonal sell-through of spring 17 higher than spring 16.

Ecommerce revenue increased to represent 29.2 percent of group retail revenue with mobile comprising of 45.4 percent of ecommerce traffic and 31 percent of transactions. Wholesale sales of 29.6 million pounds (40 million dollars), up 2 million pounds (2.7 million dollars) or 7.2 percent or 2.6 percent constant currency on last year with both the UK/Europe and North America businesses returning to growth. On a constant currency basis the strongest growth was seen across UK/Europe with sales up 11.9 percent or 11.1 percent at constant currency, while North America reported a growth of 15.5 percent or 4.2 percent at constant currency.

Rest of World segment saw a reduction in sales, at a lower margin, to the company’s Australian country partner due to an operational reorganisation. The geographical revenue break-down is relatively unchanged from last year with the UK/Europe representing 78.3 percent of group revenues, however, as wholesale sales in North America grew its proportion, Rest of the World contribution reduced, resulting in North America share increasing to 18.6 percent and the Rest of the World share reducing to 3.1percent.

Licence income of 2.6 million pounds (3.5 million dollars) was generated during the period, an increase of 8.3 percent, which the company said, grew despite the closure of the footwear licensee in 2016.

The company reports gross margin improvement across segments

Composite gross margin of 45.7percent was down by 30bps reflecting the increased proportion of wholesale sales in the mix. French Connection added that each of the businesses improved their gross margins, with wholesale delivering a margin of 31.4 percent, up on the year by 100bps, while retail delivered a margin rate at 56.6 percent, 30bps up on last year.

Retail gross margins of 56.6 percent were slightly stronger on the year, due to lower levels of promotional activity in the season. The retail operating loss of 6.7 million pounds (9.06 million dollars) was an improvement of 1.5 million pounds (2.03 million dollars) compared to prior year.

Group wholesale gross margin increased to 31.4 percent driven by the increased sales at full price which, coupled with a 2.1 percent reduction in costs at constant currency.

The company added that reduction in overhead costs in UK/Europe, together with the strengthening margin, reduced the loss incurred by 50 percent to 2.3 million pounds (3.1 million dollars) whereas North America loss has reduced by 14 percent to 0.6 million pounds (0.8 million dollars). The reduction in revenue, however, impacted the Rest of the World, with the loss increasing on the year to 0.6 million pounds (0.8 million dollars).

Picture:Facebook/French Connection


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