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French Connection swings to loss, revenues fall 11.4 percent

By Prachi Singh

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Business

French Connection Group plc announced that though the first half of the financial year saw an improvement in underlying profitability, the second half of the year proved to be particularly challenging. The company said in a statement, underlying result for the full year to January 2020 was a loss of 2.9 million pounds (3.7 million dollars) compared to an underlying profit of 0.8 million pounds in the comparative period. The like-for-like underlying result for the year, is a loss of 4.5 million pounds (5.8 million dollars) and including adjusting items and discontinued operations, the Group reported a total loss for the year of 7.8 million pounds (10.1 million dollars).

Commenting on the results, Stephen Marks, the company’s Chairman and Chief Executive said: “The performance this year has not been as anticipated and we are not being assisted by the continued difficult trading conditions in the UK and potential uncertainty due to the COVID-19 coronavirus. We believe the trading landscape in the UK is unlikely to improve in the short term and this has a potential impact on both the retail and wholesale businesses. Against this background we are working hard to ensure we are operating as efficiently and cost effectively as possible while working closely with all our trading partners to maximise business with them.“

French Connection’s annual revenues fall by 11.4 percent

French Connection added that the closure of all 14 joint venture stores in China and Hong Kong was completed in the second half and generated a total loss of 0.5 million pounds. Group revenue from continuing operations of 119.9 million pounds (156.6 million dollars) decreased by 11.4 percent or 11.1 percent at constant currency.

The company further said, wholesale revenue grew in North America but contracted in UK/Europe due to shipment timing, resulting in an overall decline of 4.8 percent or 4.6 percent at constant currency to 73.2 million pounds (95.6 million dollars). Strong continued growth of 15.7% was generated from the core department store business in North America. However, this was offset by a decline in UK/Europe revenue of 18.0% due to reduction in clearance sales and change in phasing of year-end Spring product despatches. The Rest of the World wholesale business contracted impacted by the closure of our joint venture partners in Asia. The decline in overall wholesale sales and a softer margin resulted in a profitability decrease in underlying profit for the year to 13.2 million pounds (17.2 million dollars), while adjusted underlying wholesale profit was 11.7 million pounds (15.2 million dollars).

Group retail revenue from continuing operations of 46.7 million pounds (61 million dollars) was 20 percent lower than the comparative period due to the continuing targeted reduction in the store portfolio and 2.5 percent decline in UK/Europe like-for-like sales. During the year, French Connection closed 14 non-contributing stores and four concessions, with another two concessions opening. Oxford Street store closed in the first half of the year but to maintain a Central London presence, the company opened a new concept store nearby in Duke Street, called The Studio. Total operated locations at the year-end was 81, reflecting a 26 percent reduction in total selling space. Total ecommerce revenue also contracted by 8.1 percent across the company’s websites. The overall retail performance in the year was a marginal improvement in the underlying result to a loss of 10 million pounds compared to 10.3 million pounds in the year earlier, while adjusted underlying retail loss was 11.6 million pounds.

Geographical performance of French Connection

The company said, continued strong performance in the North America wholesale business has contributed to the increase in North America share of group revenue to 33.9 percent and the corresponding decrease in UK/Europe share to 64.7 percent. The closure of the Asian joint ventures resulted in fall in Rest of the World revenue to 1.4 percent.

Underlying operating result from North America improved to 5.5 million pounds (7.1 million dollars) as a result of the continued wholesale growth. UK/Europe underlying result generated a loss of 1.6 million pounds (2 million dollars) against a profit of 2.1 million pounds in 2019 due to contracting wholesale and retail revenues. Rest of the World underlying loss increased to 0.8 million pounds compared to 0.6 million pounds in the previous year.

Global licensing of 5.5 million pounds (7.1 million pounds) was generated in the year. French Connection added that DFS continued to increase its licensing revenues with range expansion during the year, however, some of the UK historic licensing income contracted in the year as a direct result of the challenging UK economic climate and the North America shoe licence closure.

Picture:Facebook/French Connection

French Connection