FCUK offloads Farhi as part of restructure

After flogging Nicole Farhi, can French Connection copy House of Fraser's success with own-brand lines?

Last Updated: 16 Jan 2013

There have been some signs of life on the high street in recent weeks, but no such luck for French Connection. The fashion retailer behind the waning FCUK brand has been forced to take drastic action to stem widening losses: it’s flogging its loss-making Nicole Farhi brand and closing 17 of its US stores. Apparently this restructuring will enable the company to focus more on its own-brand ranges, which are seen as its best hope for revival. Perhaps CEO Stephen Marks has had one eye on follow retailer House of Fraser, where the success of in-house lines have pushed sales up 10% this year…

French Connection’s results make for pretty dismal reading. Pre-tax losses increased to £24.7m in the year to January 31, up from £16.4m in 2008. UK and European sales were broadly flat, but it had a hard time elsewhere; North America continued to do particularly badly, with sales down 8%. So Marks is cutting his losses: he said today that 17 of the underperforming stores in the US will close. This will cost about £6.5m, but should mean the company will (hopefully) trim its annual losses by £3.2m. The company has also withdrawn from Japan (only 15 months after entering the country), which cost a further £2.5m in cash and write-offs.

The sale of the ailing Nicole Farhi brand (to American private equity group OpenGate Capital) could apparently fetch up to £5m, which will certainly help shore up the balance sheet. But the decision will have been a tricky one for Marks; it brings to an end a 40-year professional - and at times personal - relationship with fashion designer Farhi. The couple have a daughter together, and although they subsequently split, they maintained a working relationship. Until now, that is. ‘We have had to make some tough decisions,’ Marks admitted. He said he was ‘very sad’ to lose the Fahri brand but insisted that the ‘added focus on the core businesses... will benefit the Group in the long term.’

The sale will also allow French Connection to concentrate on its own-label clothing ranges, which are faring much better – its Toast range, for example, showed ‘remarkable’ revenue growth of 16%. It’s a strategy that certainly seems to have worked over at House of Fraser: in a letter to suppliers leaked to the Sunday Times, the retailer said that its sales were up over 10% so far this year, thanks to a whopping 50% rise in the sales of its Therapy and other in-house brands. The Farhi-less Marks will be hoping French Connection has something similar to report this time next year.

In today's bulletin:
Brown sucked into BA row after Adonis shows no love for Unite
FCUK offloads Farhi as part of restructure
Warner to join forces with Barbarians for EMI break-up bid?
Why customer returns are good for your brand
MT Expert's Ten Top Tips: Help your team through the change curve

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