French Connection: H1 pre-tax loss widens, revenues drop 2.4 percent

In its results statement for the six months to July 31, 2018, French Connection Group PLC said that total H1 2018 revenue of 58.1 million pounds (76.5 million dollars) was 2.4 percent lower than the previous year, on a reduced store portfolio. The company's pre-tax loss widened to 15.1 million pounds against losses of 5.9 million pounds a year earlier. However, underlying profitability, reached a loss of 5.5 million pounds (7.2 million dollars), an improvement of 0.4 million pounds or 6.8 percent on the year.

Commenting on the results, Stephen Marks, Chairman and Chief Executive of the company said in a statement: “There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although we can take great confidence from the performance of the wholesale business and the stability of the licence income. The order books we have provide a clear outlook for the second half of the year in wholesale although retail continues to be challenging. We remain on target to return the business to profitability this year.”

Highlights of French Connection’s first half

Wholesale revenue grew in both the UK and North America with overall growth of 6.2 percent or 8.9 percent at constant currency) to 30.8 million pounds (40.5 million dollars), while overall retail sales of 27.3 million pounds (36 million dollars) reduced by 10.5 percent or 10.1 percent at constant currency with a UK/Europe LFL declining 7 percent.

Composite gross margin of 41.5 percent was down by 140bps. Both Wholesale and Retail saw margin dilutions with wholesale delivering a margin of 30.8 percent, down by 60bps, while retail delivered a margin rate at 53.5 percent, 30bps down on last year.

On a constant currency basis the strongest wholesale growth was seen across UK/Europe with sales up 14.5 percent, and with North America up 7 percent. In rest of world segment, there was a reduction in sales to the company’s partners in Australia and Hong Kong.

French Connection said that the reduced store portfolio followed the planned closure of two non-contributing stores in the period, and three non-contributing stores and three concessions in the past 12 months; a reduction of 7.7 percent in average trading space over the 12 months period. One new store in Manchester was opened in the past 12 months, and one new concession was opened during the half.

Ecommerce revenue increased in proportion to represent 21.5 percent of group retail revenue. The company added that mobile now comprises 54.4 percent of ecommerce traffic and 39.5 percent as it continues to develop CRM capability and targeted social media advertising.

Picture:French Connection website