French Connection's Profit Falls After Stores Close
Gross profit fell to £31.1 million for the six months to July 31, as the British retailer closes seven stores in 12 months.
LONDON, United Kingdom — British fashion retailer French Connection Group Plc reported a drop in profit for the half-year due to the closure of some of its stores.
The owner of the Toast, French Connection and Great Plains brands has been struggling to fend off competition from fast-fashion rivals such as ASOS, Forever 21 and Inditex's Zara. It has closed stores and hired new management and design teams as it tries to return to a profit.
In March activist investor Gatemore Capital urged the loss-making company to split itself or spin off its Toast brand, among other options. It offloaded its entire stake in July, saying it was not satisfied with the pace of change at the 45-year old retailer.
British billionaire Mike Ashley's Sports Direct International took an 11.2 percent stake in French Connection in February, becoming its second-largest shareholder. Sports Direct's intentions were not clear.
French Connection said gross profit for the six months to July 31 fell to £31.1 million ($41.9 million) from £38.1 million ($54.4 million) a year ago.
Revenue came in at £68.1 million ($91.9 million), down from £69.2 million ($93.4 million) year ago.
French Connection, which has more than 409 outlets, said it closed seven stores over the last 12 months, reducing its trading space by 10.2 percent.
Sales at stores open for more than a year in the UK and Europe were "broadly flat", it said on Tuesday.
However, revenue at its wholesale operation rose 7.2 percent to £29.6 million ($39.9 million), with the business returning to growth in UK, Europe and North America.
"We have definitely seen momentum build in the first half of the new financial year with improvements across all the divisions despite difficult trading conditions," its chairman and chief executive Stephen Marks said, admitting that there is a lot to do before company returns to profitability.
French Connection posted its fifth annual loss in a row in March.
To boost profitability, the company said it would cherry-pick locations for new store openings, with one store scheduled to open in November in Manchester.
French Connection's current position is a far cry from the heady days of 2004 when the huge success of its FCUK brand boosted the company's shares to more than 500 pence. The stock has plummeted since and was trading 2.3 percent lower at 43.3 percent by 0735 GMT.
By Rahul B in Bengaluru; Editor: Louise Heavens.