French Connection - is a sale still on the cards?

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Our Stock Watch series provides investors with what they need to know about companies hitting the headlines. This time: French Connection

French Connection - is a sale still on the cards?

Why is French Connection in the news?

Retailers, especially fashion retailers, have borne the brunt of the rout in the sector. Many of French Connection’s competitors have seen a slump in sales and had to make rapid changes to give today’s demanding and cost-conscious consumers the sort of shopping experience they insist on.

French Connection’s sales pattern has followed suit and back in September it posted a decline in first-half sales amid a “tough” retail backdrop in the UK.

A few weeks later it said it was reviewing “all strategic options to deliver maximum value for its shareholders”, including a potential sale of the company. There’s been no further word on the matter since then.

So how is trading?

It seems French Connection has joined up the dots and turned the last year’s losses into a modest profit.

It managed to make a small profit for the first time in seven years. Pre-tax profits came in at a measly £100,000 but it’s still back in the black after seven years in the red and it’s a big leap up from last year’s loss of £2.1 million.

That’s no mean feat in the current climate and following the continuing effect of House of Fraser’s slump into administration.

The turnaround has come from a strong wholesale performance which offset a 6.8% fall in retail like-for-like sales. That side of the business was less rosy. Like-for-like sales fell, both in store and online.

What’s the expectation going forward?

By the group’s own acknowledgement, its customers’ “conservative” attitude to clothes shopping going forward is likely to keep the current year’s sales muted.

No further word on the potential sale of the company that was mooted in October. Founder Stephen Marks, who is also chairman and chief executive, still owns almost 40%. But the going concern over its cash forecasts and funding suggests the potential may not have gone away. And it is yet another retailer that has Sports Direct’s Mike Ashley circling overhead. Sports Direct has a 26% stake in French Connection.

More on French Connection

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