French Connection today said it would concentrate on sales via third-party retailers and websites while making its own business more efficient as it reported falling sales and profits.
More of the fashion retailer’s sales now take place via third-party traders than directly via its own shops and websites, and the retailer today said that model should help protect it against the worst effects of the coronavirus. However, wholesale was down over the year as UK and European sales reduced in a “difficult” market and US tariffs made its growing business in that market less profitable.
At the same time, having taken the business of the market, the retailer continues to invest in its online business to improve the customer experience and conversion, while ‘right sizing’ its store estate in the light of online. During the year it closed 18 sites, including 11 shops, three outlets and four concessions, with a knock-on effect on its direct sales.
The retailer, ranked Top350 in RXUK Top500 research, today reported total group revenues of £119.9m in the year to January 31. That’s down by 11.4% on the £135.3m reported a year earlier. Retail sales of £46.7m were 20% down from £58.4m last time. Like-for-like sales, which strip out the effect of store openings and closures, were down by 2.5% from a drop of 6.8% the previous year. Wholesale revenues of £73.2m were down from £76.9m last time, although its US wholesale business was up by 15.7%.
Pre-tax losses came in at £2.9m before one-costs of £4.4m – related to store closures, asset write-downs and bad debts – took it to a bottom line loss of £7.3m. Last year, it made a pre-tax profit of £0.8m before one-off costs of £9.4m took it to a bottom line loss of £8.6m.
Stephen Marks, French Connection chairman and chief executive, said: “The performance this year has not been as anticipated and we are not being assisted by the continued difficult trading conditions in the UK and potential uncertainty due to the Covid-19 coronavirus.
“I am however, pleased with the continued good performance of the wholesale business in the USA and we have good forward order banks in the UK to be delivered during the first half of the year. The initial reaction to the winter ranges has been positive, particularly at our recent New York Fashion Show.
“We believe the trading landscape in the UK is unlikely to improve in the short term and this has a potential impact on both the retail and wholesale businesses. Against this background we are working hard to ensure we are operating as efficiently and cost effectively as possible while working closely with all our trading partners to maximise business with them.”
Almost a quarter (24.2%) of French Connection sales took place online during the year – with 63.8% of those via mobile. However, overall ecommerce sales fell by 8.1%. This, said the company, reflected the wider trading environment as well as internal team changes, although investment in personalisation and social media channels did deliver benefits towards the end of the year. “We intend to build on this as we go forwards,” the full-year statement said. “The ecommerce business together with our own site and through third-party customer platforms will play a significant part in the growth of the business in the future.”
French Connection says that while the impact of the Covid-19 coronavirus is as yet unknown, all office staff can work from home if they need to. It is reviewing the likely impact on its supply chains for winter season products coming from the Far East but chief financial officer Lee Williams says, in today’s full-year results statement, they “do not know for sure just yet how this will play out.” He added: “A major concern is that the outbreak leads to further reductions in footfall on the high street, though with our reduced exposure to pure retail we are less exposed than others. We will continue to monitor the situation closely.”
French Connection says it is relatively well shielded from the long-term implications of a still-unclear Brexit.
“The group considers the principal risk factors to be macro-economic uncertainty leading to a downturn in the UK economy, trading restrictions leading to friction at the borders, the imposition of tariffs, further exchange rate volatility and other recruitment concerns,” it said in today’s full-year statement. But it says its natural hedges to some of these issues include the fact that most of its suppliers are already outside the EU, and that some of its business takes place in US dollars and euros. No senior staff are EU citizens from outside the UK, and it has “communicated across the organisation the steps and procedures required to assist any EU citizens to take advantage of the EU Settlement Scheme to remain in the UK following any transition period.”
Image: Screenshot of www.frenchconnection.com