Retailer ‘back on track’ following overhaul

It made profits from continuing operations of £8.9m in the year to January 31, compared to a loss of £9m the previous year, despite the difficult conditions on the high street.

The restructuring has seen the company sell its loss-making Nicole Farhi brand and close its Japanese business and some stores in North America and Europe.

The shake-up left French Connection with its UK and European retail and wholesale operations, the Great Plains wholesale-only ladieswear range and Toast, its mail-order fashion and homewares brand.

Chairman and chief executive Stephen Marks claimed the business was “back on track” following its reorganisation.

He said: “I am delighted with the significantly improved performance for our latest financial year.

“We have achieved a considerably higher profit from the core continuing operations, notwithstanding a period of major change for the group and challenging market conditions.

“I am looking forward to growing the business further from the solid foundations generated by our recent reorganisation.”

Same store sales in the UK and Europe declined by 1.4 per cent in the year, but sales to other retailers in the division grew by 11 per cent to £36.1m. Group sales from continuing operations increased by 2 per cent to £205m.

The fashion industry faces significant pressure after cotton prices doubled and as wages in the Far East continue to rise, while consumers are sensitive to price increases, added Mr Marks.

Shoppers have been warned by analysts and retailers that they are likely to face higher clothing prices due to the soaring cost of cotton. Fabric accounts for up to 70 per cent of the price of a product.

Between September 2009 and September 2010, the price of cotton increased by around 45 per cent, which helped to push up fabric prices.

Mr Marks is confident that French Connection has the stability to gain market share and benefit from any recovery in clothing sales.

He added: “I am confident that we have the people, infrastructure, drive and brand strength to build further on the growth we have achieved.”

Shares rose after the company trebled the dividend payout for shareholders to 1.5p and said future payouts would increase with profits.

The company made a bottom-line loss of £2.4m compared to £24.9m the previous year when non-continued operations are included.

Founded in 1972 by Mr Marks, French Connection was set up to create well-designed fashionable clothing that appealed to a broad market.

According to its official website, French Connection offers a clothing range with a quirky spin on design. It has stores in Sheffield, York and Leeds.

After establishing a core clothing business, the company has expanded its portfolio into areas including men’s and women’s toiletries, sunglasses, watches and shoes.

In a statement issued yesterday, the company said: “Our wholesale businesses have made significant improvements in revenue, gross margin and profit. In recent seasons our wholesale customers have reported encouraging levels of sell-through of our products and we will continue to work closely with them and encourage them to stock a broader and deeper range of our products.

“We have recently agreed four new franchises with operating partners in Russia, Hungary, Turkey and Jordan. Our licensed partners in Australia, China, Hong Kong, India and elsewhere continue to perform well.”

For Spring, French Connection has launched the ‘You are Man?’ and ‘You are Woman?’ advertising campaign. For two weeks, French Connection set up what it described as ‘The Man Camp’ on the Isle of Malta and ‘The Woman Camp’ on the Isle of Gozo.

The power of advertising

French Connection has grown significantly to operate from more than 340 branded stores around the world. It has become famous for its eye-catching advertising campaigns.

The company said: “We estimate that, through all of the different channels of distribution, the brand generates more than £400m of retail sales each year.

“Our key aims in developing this business is to steadily increase the revenue from each of the areas in which we operate while controlling gross margins and limiting operating cost increases.

“Our business is naturally operationally geared, meaning that increases in revenue will generate substantial increases in profit.”