French Connection recovery hopes dashed

French Connection has warned that it faces a substantial loss when it posts its annual results.

French Connection has warned that it faces a substantial loss when it posts its annual results. - Credit: PA

Fashion chain French Connection today warned that it now expects to make a big annual loss after seeing its recovery hopes dashed by a difficult spring trading period.

Shares in the retailer crashed 20% as it told the City that half-year results will be “materially lower” than expected.

Analysts at Cantor Fitzgerald now expect the company to register a loss of £3.5million for the 2015/16 financial year, compared with their previous forecast for a profit of £500,000.

The chain, which has around 120 stores and concession outlets in the UK and Europe, said it now plans to close seven stores this year as the firm’s retail arm continues to find high street conditions tough.

Shares in the company, which competes against brands such as Reiss, Whistles and Ted Baker, have now fallen by more than half since last May.

Founder Stephen Marks, who is the company’s chairman and chief executive, has closed under-performing stores, grown online business and employed a new design team in a bid to end a long run of losses.

The retailer added that its wholesale performance is in line with expectations, with forward orders up year on year, while its licensing continues to perform strongly.

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In March the chain said like-for-like sales at its UK and European stores slipped 3% in the year to the end of January, due to disappointing second-half trading which included unseasonally warm weather.

Operating losses for the year were cut to £800,000 from £4.4m a year earlier and £7.2m in 2013. However, losses from the retail estate remained high at £11.3m as tough conditions on the high street offset stronger trading in wholesale and licensing channels.

Cantor Fitzgerald broker Freddie George said that the chain’s “retail trading in first quarter has been well below its expectations, impacted we believe by a weak retail trading environment, particularly in February and March.”

He added: “We also believe that there has been a step back in the quality and depth of the ranges in the stores.”

French Connection added that its cash levels had fallen to £9.9m, 17.5% lower than 12 months ago. It added it had no debt, and that stock levels were 7% lower than the prior year.