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French Connection invests in ecommerce but considers UK store closures

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French Connection today said it was investing in ecommerce but considering closing stores as it announced a review of its UK business sparked by the “most difficult Winter season” chief executive and chairman Stephen Marks had ever seen.

The multichannel fashion retailer, which owns wholesale ladieswear brand Great Plains and ecommerce fashion and homewares brand Toast alongside clothing label YMC and its core French Connection brand and retail chain, revealed that ecommerce sales now account for 17% of its retail revenues, as it announced a 5% rise in turnover but a 31% fall in profits in its latest financial year.

The company said it was investing online in order to boost functionality and delivery services. Ecommerce was a primary beneficiary of £1.6m invested in stores and IT equipment in the last year. But at the same time, it said it would consider closing stores when store leases end and lower rents could not be negotiated. “Our experience so far has been that landlords are prepared to negotiate lower rentals in the current environment but where this is not possible and stores are uneconomic it is likely that we will reduce the size of the portfolio,” it said in its financial statement. Some six leases come to an end during the current financial year and eight next year.

The update came as French Connection posted revenues from continuing businesses of £215.4m in the year to January 31 2012, up by 5% compared to the previous year. But pre-tax profits from those businesses fell to £5m from £7.3m in the previous year, a fall of 31.5%.

Chairman and chief executive Stephen Marks said the business’ wholesale, international and licensing businesses had performed well over the last year. “However,” he said, “in the most difficult winter season I have seen in all the years I have been in business, our UK retail division has been very disappointing and this has had a significant effect on our results for the year.”

French Connection is now set to review the business while making improvements to “revitalise our trading performance and retail results, particularly in the UK.” Upcoming changes include a new premium womenwear range for the Spring, to be sold exclusively online and in its own stores, as well as a range of homewares to be sold online and in its larger stores.

In its financial statement French Connection said increasing full-price sales was key to improved profitability in its retail business. “Strong product ranges, supportive marketing, appropriate pricing and careful inventory management are important elements of achieving this and we are making all efforts to improve performance in each of these areas,” the company said.

Better news came from the company’s wholesale and international business. The company reported a 17% rise in wholesale business in the UK and Europe, while its North American business turned in a £3.3m profit and strong sales growth came in the its Hong Kong and China joint ventures. Income from brand licensing, such as a cosmetics deal with Boots, grew by 47% to £8.5 million from £5.8 million last year.

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