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French Connection reports sales cut in half and pre-tax losses almost tripling as Covid-19 lockdown sent its business online

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Image: Screenshot of frenchconnection.com
Image: Screenshot of frenchconnection.com
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French Connection reports sales cut in half and pre-tax losses almost tripling as Covid-19 lockdown sent its business online

French Connection today reported first-half sales cut in half by Covid-19 lockdowns, while pre-tax losses were almost three times higher than a year earlier. Its sales moved online as its stores closed but were 53% lower than the same time last year, overall, despite an 8% growth in ecommerce sales.

 

As stores closed, the proportion of French Connection sales made online more than doubled during the first half, with more than half (56.4%) of its sales taking place over the internet, up from 22.3% a year earlier. Of its online sales, 54% were via mobile, up from 46.6% in 2019, as was 66.4% of traffic (61.3% 2019).

 

French Connection has reported group revenue of £23.9m in the six months to to July 31. That’s 53.1% down on the £51m it reported at the same time last year. The sharpest fall was in sales via its own shops, which fell by 57.6% to £10.1m from £23.8m last time. The fall reflected both the Covid-19 lockdown period and the permanent closure of nine shops during the first half. Wholesale continues to be the larger part of the French Connection business, although sales of £13.8m were down by 49.3% on the £27.2m it reported last time as third party customers continued to trade online but also saw their stores close in lockdowns. Licence income of £1.5m was down from £2.7m a year earlier.

 

Underlying pre-tax losses for the period came in at £12.2m, but at the bottom line, after one-off costs of £1m, the retailer reported a pre-tax loss of £13.2m, 186% greater than the loss of £4.6m it reported at the same time last year.

 

The Covid-19 lockdown effect

French Connection said that its stores had seen low levels of sales since reopening from Covid-19 lockdown. Sales had built slowly from a low level in a trend that has been slightly reversed as local lockdowns have been imposed. It says it’s too early to say whether, when and how store footfall and sales will recover.

 

First-half online sales rose by 8.1% compared to last year, with sales higher for casual styles and homewares. The overall rise came despite a fall in ecommerce sales for several weeks at the start of lockdown, but since then French Connection says it has developed both the functionality and the marketing of the site and that has led to growth that has continued into the second half.

 

In July, the retailer put in place a two-year £15m working capital facility and says that this should cover its cash needs for that time. It has also negotiated rent reductions with its UK landlords and stopped all discretionary spending. The retailer says there’s continued uncertainty about trade over the next few months, in the light of which it says it will be important for it to focus on cost control and preserving cash.

 

French Connection chairman and chief executive Stephen Marks said: “This has undoubtedly been the most difficult trading period that the group has ever faced and I would like to thank our staff, both those who have kept the business running and those who have been on furlough, for their ongoing commitment to French Connection. Despite the unprecedented difficulties we continue to face alongside the rest of the High Street, having been able to secure the necessary financing we feel that we are well positioned to navigate an extended period of uncertain consumer demand but also ready to capitalise on any opportunities that may arise especially given the good performance of wholesale, while maintaining a very tight control of costs.”

 

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