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French Connection expects £7m profit drop

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UK fashion retailer French Connection has today issued a trading statement warning that its operating profits over its first half will be £7 million lower than the previous year.

Revenue for the six months ended July 31st 2012 has also decreased, standing at seven per cent lower than last year, while gross margin has reduced due to discounting.

In a statement, the Group said: “Our new Winter collections are now available in our stores and on-line.

“The initial reaction has been encouraging, but our experiences in the first half of the year are leading us to be very cautious in our outlook for retail revenue in the second half of the year.”

In May, the retailer issued an initial profit warning that it is expecting to fall short of its full-year profit target and noted today that trading has continued in line with this guidance.

US retailer Sears has terminated its supply agreement to stock its branded ‘UK Style by French Connection’ products, which generated net income of £1.9 million in the year to January 31st 2012 and the group expects the income from this licence for the year to January 31st 2013 to reduced by £1 million.

However, the Group highlighted a number of new licencing opportunities currently in development and noted continued revenue growth in North America which has served to offset the decline in UK orders slightly.

As wholesale orders across the UK and Europe are below last year’s levels, the Group warned: “As previously reported we are conducting a thorough review of the UK/Europe retail operation in conjunction with external specialist advisors.

“The process is well advanced and we have commenced in-store trials addressing the customer proposition and experience with the goal of improving sales densities and margin while reducing costs.

“We will cover this more fully at the time of our half -year results announcement in September.”

Published on Thursday 09 August by Editorial Assistant

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