Image via Wikimedia Commons (Andrew Meredith)

French Connection issues profit warning, shares dive

The fashion chain has issued its second profit warning in six months, prompting an exodus of shareholders and plummeting share value.

by Michael Northcott
Last Updated: 19 Aug 2013

After a period of disappointing sales for French Connection, the group announced today that it is unlikely to meet market expectations in its full-year results, triggering a share price drop of 23%. The retailer had been doing quite respectably, with full-year revenue to the end of January 2012 up £10m on the previous year, to £215.4m. But the growth has not been sustained, and with the situation not improving, shares have lost almost 70% of their value over the last 12 months.  

Back in January, CEO Stephen Marks knew the firm was in difficulty. He described the end of 2011 as ‘the most difficult winter season I have seen in all the years I have been in business…our UK retail division has been very disappointing and this has had a significant effect on our results for the year.’ This was euphemistic compared with the company’s informal interim statement today, which said UK and Europe revenue was down 10% in the 15 weeks to May 17 compared with the previous year. Overall group sales fell 9.5%. Guess those classy but confusing ‘She is the woman’, ‘I am the suit’ ads didn’t go down quite as well as ‘FCUK like a bunny’...

The announcement comes as a raft of other high-profile retailers are being put through the mill. Late last month SuperGroup, which owns the Superdry clothing brand, issued its second profit warning in a year after disappointing January revenues. Game, Jane Norman, TJ Hughes and Habitat have all gone into administration in the last 12 months, and Clinton Cards’ administrator today announced the closure of 350 stores. So French Connection is not alone in its woes. 

The company says that it still has £11.3m of cash in the coffers at the end of the 15 week period however, which although a decline of 39% on the previous year, will provide a safety net if things get any worse. With sales, profits and share price falling though, French Connection has got a job on its hands, especially while the UK economy is still showing no signs of life…

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