Would management at French Connection listen to Gatemore this time?

A reported offer on the table, staggering pressure to win over a more competitive than ever high street and quite an expectation at the City to see whether French Connection will listen to its active investor this time are set to dominate the company´s update later this week.

This Tuesday, the retail chain is expected to report that it has narrowed losses from 7.9 million pounds after shutting a number of stores and curbing discounting, calls out ‘The Telegraph’. Figures, however, tell another story as like-for-like sales are forecast still to be negative.

In this regard, “Stephen Marks is a genius with product, but not great at making money”, Freddie George, analyst at Cantor Fitzgerald, commented in a note to investors.

Last year, the UK fashion retailer reported widening losses of 4.7 million pounds, while revenue fell 8 percent to 164.2 million pounds.

Gatemore criticises turnaround plan: “not adding enough value or going fast enough

Liad Meidar, managing director at Gatemore, said another dip in sales would be a fresh sign that the company’s “turnaround plan is not adding enough value or going fast enough”.

In this regard, US fund Gatemore Capital Partners, which owns an 8 percent stake in the fashion group, is trying to secure a meeting with French Connection’s founder Stephen Marks and board to put forward ideas to improve performance.

Meidar said it wanted the audience to discuss a turnaround plan under which the long-serving non-executive directors Dean Murray and Claire Kent would be replaced, reports ‘The Guardian’.

“He [Marks] is not really willing to have an open conversation about why French Connection is under performing,” said Meidar, who added that a wider shareholder base was unifying around its ideas. “You have a 41 percent shareholder who is running this business at his leisure, not for for the benefit of all shareholders.”

Noteworthy, Stephen Marks is refusing to sit down despite the activist investor’s efforts for him to give his dual role as chairman and chief executive at French Connection.

The retailer will update the City on first-half trading on Tuesday September, 20.

On the upside, in late August, Rutland Partners made it to the news as the new likely suitor for the ailing company. As widely reported by different titles, the private equity investors were considering a potential 40 million pounds purchase of French Connection.

According to the ‘Sunday Times’, Rutland would have been exploring a deal with French Connection since early this year.

Image:French Connection Blog