French Connection warns over profit targets

It is not expecting any respite from the challenging conditions responsible for a 12 per cent slump in UK like-for-like sales over the last three months.

The latest warning from French Connection comes two months after its UK stores announced losses of £8.2m in its last financial year.

Founder and chief executive Stephen Marks said a review of the UK retail business was well under way but admitted that consumer caution and ongoing economic turbulence continued to affect the business.

He said: “We therefore remain cautious about the outlook for the rest of the financial year. Given this, it appears unlikely that our profit performance for the full year will meet current expectations.”

Shares have fallen by nearly 70 per cent since October.

Numis Securities said the UK sales decline of 12 per cent was much worse than its forecast for a fall of 2.5 per cent.

And while the performance was affected by the wet weather and comparisons with Royal Wedding trading last year, Numis analyst Andrew Wade said it was likely French Connection had underperformed against its rivals.

He added: “Over the last 15 years, UK clothing has become an increasingly competitive space, particularly at the fashion end, and any turnaround will take time to execute.”

Mr Wade now expects the UK division to post a loss of £13m this year and drive the overall group to a £500,000 deficit.

The company’s retail difficulties in the UK have been offset by better trading through wholesale channels and its licensing business, while profits have continued to improve in North America.

New projects aimed at reinvigorating its UK retail arm have included a range of premium womenswear which is exclusive to its stores and the internet.

It has also broadened its branded offer to include homewares in larger stores and online.