Brainfood: Behind the spin - fcuk

THE DILEMMA

by
Last Updated: 31 Aug 2010

French Connection is not the brand it once was. The in-your-face fashion retailer, founded in 1969, was known for its high-fashion designs, but it seems to have lost its way. Year-on-year sales to the end of January 2005 were down 12% and profits before tax fell 15% - the first drop for nine years. Stephen Marks, the company's founder, chief executive and chairman, blamed the poor performance on an ill-judged range and a bottoming-out of the market. The first weeks of the new financial year proved no better, with like-for-like sales down 17%. The group also owns designer Nicole Farhi and has a 75% stake in mail-order company Toast.

THE SPIN

Marks attributed the company's recent disappointing figures to its autumn/winter collection, which he described as having 'too many basics and not enough fashionable product'. He remains bullish about the group's future and called the recent troubles no more than a blip, confident that the spring/summer ranges will sell well. He has boosted the buying team, but vented some of his frustration at an over-critical press: 'We are undervalued. We get no credit for running this business well for nine years, for making £33 million profit and having £52 million in the bank. All we get is everyone slagging us off.'

THE STRAIGHT TALK

The City is worried that the company has lost its magic touch, with some calling its long-running FCUK ad campaign tired and tacky. Marks explained: 'What happened is that we stayed static too long and relied on our previous successes and then we got caught out.' He pointed out that the FCUK-branded T-shirt was the company's best seller and that the updated branding was selling well. But analysts remain cautious: Richard Ratner of broker Seymour Pierce told the Financial Times that it would take time for customers to return and forecast a 'pretty grim' first half. The company has already dropped out of the FTSE-250.

THE VERDICT

There is hope - Marks is an experienced retailer and many are confident he will turn the company around. Says Ratner: 'French Connection is in an area of retail aspirational fashion that is doing relatively well. If and when it gets the fashions right, we should see a scramble back into the shares.' Persistent rumours of a buyout by Baugur have been denied. The Icelandic retailer recently acquired a 1.5% stake in the business following Marks' decision to sell some of his 56% stake to fund his £40 million divorce.

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