French Connection struggles in pandemic-hit first half

By

Sandra Halliday

Published
Oct 13, 2020

French Connection’s interim results on Tuesday didn't make happy reading as the six months ending July 31 saw the majority of its trading period impacted by the pandemic.

This meant revenues fell 53.1% to only £23.9 million and it made an underlying loss of £12.2 million, compared to a loss of £3.6 million a year earlier. This was “driven by the significant decline in sales and resulting additional one-off stock provisions, offset by cost savings across all areas”.

Its wholesale revenues were £13.8 million, down 49.3%, reflecting the closure of customers' stores in all regions, although some deliveries continued to webstores.

And retail revenues, at just £10.1 million, were down 57.6%, partly due to the lockdown period, but also due to the permanent closure of nine retail locations in the half as the company continued its store rationalisation programme.

Gross margins were hurt by both “the loss of the full-price selling period during the lockdown and higher levels of current and older stocks remaining at the period end”.

But it said it was able to make the most of e-tail opportunities during lockdown and saw rising sales here, especially of more casual styles.

E-sales rose 8.1% for the six months, even though at the start of the lockdown “business dropped off significantly for a number of weeks”. It said it has “made good progress in developing the functionality and marketing of the site and [has] seen growth continue into the second half”.

And the company said that current trading is in line with its expectations. It didn’t put any numbers on this, but it’s clear that things are nowhere near back to normal. 

Since its stores reopened, it saw “a gradual sales build from a low base”, but since the recent revision and further lockdown guidance in parts of the UK, “this has reversed slightly”.  

Yet while the finalisation of winter order books was disrupted by the lockdown, its wholesale customers “are growing in confidence in the UK, with their intake of winter goods improving and reorders running ahead of last year driven by more casual product”. That said, in the US, “there appears to be more caution from the department stores at this time with winter goods only really starting to flow now”.

But it also said it had a “very good reaction from customers to the Summer 21 collection”. 

Chairman and CEO Stephen Marks said the last half-year was “undoubtedly the most difficult trading period that the group has ever faced”. But the firm was “able to secure the necessary financing [and] we feel that we are well positioned to navigate an extended period of uncertain consumer demand, but also ready to capitalise on any opportunities that may arise especially given the good performance of wholesale, while maintaining a very tight control of costs”.

On the finance front, the company managed to raise £15 million, which it said should see it through a worst-case-scenario situation.