Dark days for French Connection: big loss expected

Fashion retailer French Connection UK is expecting to reveal a significant loss for the final quarter of 2012 after Christmas sales were hurt.

by Michael Northcott
Last Updated: 19 Aug 2013

But in this instance, unlike with other retailers that simply had a bad run, French Connection is likely to blame a bad piece of strategy. Despite aggressive discounting from online competitors, the firm decided to delay its own discounting over the key Christmas sale period to protect margins.

It seems this was a catastrophic decision, as lower demand from consumers and the continued promotional activity of the competition drew people out of its stores. The firm explained that like-for-like sales in the 24 weeks to 12th January fell by 2.9% compared with a year earlier, and said 1.9% of that was due to a late start on its sale. 

The store is reportedly expecting to make a loss of around £8m for the full financial year, considerably more than the £5m loss it made the previous year. The chain’s full-year results are not due until 13th March, but similar tactics in the US are expected to yield similar results.

Shareholders are obviously rattled by the warning, too, as shares were down 11% to 26.81 pence in early trading on Wednesday, and given that they have already fallen 25% in the last year, it’s not looking like a good bet to ‘hold’.

At MT, we can see why bosses wanted to try and protect margins, but when battling the influence of low-cost online competitors such as ASOS, perhaps Christmas was not the time to do it. 

And with losses bigger this year than last, we can imagine bosses saying: ‘FCUK, what a mess.’ 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Latest on MT

When will high street banks disappear?

When will high street banks disappear?

Branches are closing at an accelerating rate, but don't expect them to disappear entirely.

Burger chain Byron em-broiled in controversy after immigration raid

Burger chain Byron em-broiled in controversy after immigration raid

Reputational disasters can emerge out of thin air.

Apple still over-relies on the iPhone

Apple still over-relies on the iPhone

The tech giant's trying hard to diversify, but karaoke shows and Pokémon Go won't make up for dropping iPhone sales.

Will Mark Zuckerberg's mobile-first strategy make Facebook bigger than Google?

Will Mark Zuckerberg's mobile-first strategy make Facebook bigger than Google?

UPDATE: Facebook's mobile revenues increase 84% year on year. Does this give the social network the edge over Google?

5 things you didn't know about R&D tax credits

5 things you didn't know about R&D tax credits

Is your business innovating? You could claim back tax on fuel, staff and other costs.

Can you start your own business without quitting your day job?

Can you start your own business without quitting your day job?

Torn between the freedom of the start-up life and the security of the payroll? As a part-time entrepreneur you can have both.