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UK: Fashion chain braces for big loss

09:49 16 January 2013

A French Connection store in London

A French Connection store in London

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French Connection has warned of more big losses after its UK sales remained in decline in the wake of softer trading in the run-up to Christmas.

The fashion chain said the 2.9% fall in UK like-for-like sales for the 24 weeks to January 12 partly reflected the decision to delay the start of its winter sale by one week in an attempt to boost the value of the brand.

Having reported a half-year loss of £6.3 million in September, French said it expects this figure to rise to between £7.5 million and £8 million for the year to the end of January.

The guidance is much worse than City forecasts, causing shares in French Connection to open more than 15% lower today. Analysts at Seymour Pierce stockbrokers warned it will be another two years until the company breaks even.

The UK retail business, which posted a 9.5% fall in like-for-like sales in the first half of its financial year, reported a good start to the autumn and winter season before the trend “softened a little” in the run up to Christmas.

French Connection recently vowed to improve ranges, sharpen prices and close loss-making stores following a review of its UK retail business. It expects to provide further details of the turnaround plan when it presents full-year results on March 13.

The company is also introducing a new range of premium womenswear exclusive to its stores and has broadened its offer to include homewares in larger stores as part of the drive to turnaround its performance.

Seymour Pierce said today’s figures compared with expectations for flat sales in the UK and losses of £4.5 million for the full year.

Analyst Kate Calvert added: “Although these results are disappointing, we believe the business does have value.”

She praised brands such as Toast and Great Plains and said the company’s balance sheet was strong with net cash forecast at £25 million.

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