Dark days for French Connection: big loss expected
By Michael Northcott Wednesday, 16 January 2013
Fashion retailer French Connection UK is expecting to reveal a significant loss for the final quarter of 2012 after Christmas sales were hurt.
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.’