French Connection returns to profit but like for like sales drop 6.8 percent

For the year to January 31, 2019, French Connection Group Plc said, underlying results show a profit of 0.1 million pounds (0.13 million dollars) compared to loss of 2.1 million pounds in 2018, and the first underlying profit for the business in seven years. Group revenue from continuing operations increased by 0.3 million pounds, 0.2 percent or 1.9 percent at constant currency to 135.3 million pounds (178.8 million dollars), which the company said was due to strong wholesale performance up 10.3 percent or 13.2 percent on constant currency, which offset a 6.8 percent negative retail like-for-like performance combined with store closures.

Commenting on the results, Stephen Marks, Chairman and Chief Executive of French Connection said in a statement: “I am pleased to report that we have achieved our target of returning the group to underlying profitability this financial year. While we still have a way to go to return the business to an appropriate level of profitability, I believe that we have made and continue to make significant progress.”

Review of French Connection’s full year results

Group wholesale revenues from continuing operations of 76.9 million pounds (101.6 million dollars) were 10.3 percent or 13.2 percent in constant currency over the prior year with growth across UK/Europe and North America during the year, partly offset by a continuing decline in the lower margin Rest of World segment. This strong performance, the company said, saw wholesale’s profitability increase 25.6 percent in the year to 15.2 million pounds (20 million dollars).

Retail revenue from continuing operations for the year was down 6.9 million pounds to 58.4 million pounds (77.1 million dollars), a drop of 10.6 percent or 10.2 percent on the comparable 52 weeks. During the year, French Connection closed 10 non-contributing locations consisting of five stores and five concessions, while opening a new You Must Create (YMC) store and one French Connection concession, ending the year with 96 operating locations. On a LFL basis, sales in UK/Europe contracted by 6.8 percent and total ecommerce revenue also contracted by 3.7 percent across websites. The retail division also increased its loss to 10.3 million pounds (13.6 million dollars), a 6.2 percent change on the prior period with cost reductions unable to offset the reducing LFL sales.

The company added that geographical revenue break-down for 2019 continues to be weighted towards UK/Europe representing 70.7 percent of group revenues but due to the stronger growth in North America than in the UK/Europe this is down on the previous year. Of the overall 2.2 million pounds (2.9 million dollars) improvement in underlying operating profit, 1 million came from UK/Europe, while North America contributed an extra 1.3 million pounds over the previous year. This more than offset the increased loss of the Rest of World segment, which saw the loss increase to 1.3 million pounds (1.7 million dollars).

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