Another day, another dismal showing from a high street retailer. This time it’s French Connection, which made a £17.4m pre-tax loss in the year to January 31 (it made a £3.1m profit last time around). The fashion chain blamed the US for its wretched results, suggesting that the spending slowdown had been much more pronounced on the other side of the Atlantic – US retail sales were down 3% for the year, despite a series of price promotions that took a big bite out of profit margins. And with its once-edgy FCUK brand now looking a bit past its best, it’s hard to envisage a recovery in 2009 as the recession deepens…
Chairman Stephen Marks admitted that the results were ‘disappointing’, but suggested they were ‘a reflection of the impact on fashion markets of the downturn in the major world economies and in particular the US market’. Overall, sales were up 5% to £248m, but that was partly due to it taking full control of its joint venture in Japan – revenues were pretty flat in the UK and Europe, while retail sales fell in the US, forcing the chain to write down the value of its US business by more than £10m. Oh dear.
However, Marks insisted there were some reasons to be positive ‘behind the gloomy headlines’. Notably its UK like-for-like sales were actually up 2%, a surprisingly good performance (ladieswear is apparently doing particularly well). He also said the company was doing its best to boost the bottom line by ‘reducing costs and improving efficiency’ – although since most of its cost base is fixed, this may largely amount to squeezing suppliers (unless it decides to start closing some of its stores). And the good news is that it has plenty of cash in the bank, so it’s not in any danger of running out of money to pay the bills (partly because it’s cancelled its final dividend, much to shareholders’ chagrin).
Still, with Marks admitting that 2009 is likely to be ‘another difficult year’ for French Connection, and no sign of a general recovery on the high street, it’s no surprise that today’s results went down like a lead balloon with investors. Its share price is currently down about 8%, after City analysts fell over themselves to tell investors to dump the stock. A few thinly-disguised obscenities won’t be enough to get French Connection out of this particular hole.
In today's bulletin:
FSA's Turner promises to get tough on banks
Unemployment tops 2m for first time in 12 years
FCUK profits - French Connection reports £17m loss
Debate: Bonus culture - force for good or unnecessary evil?
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