French Connection posts annual loss, revenues down 6.7 percent
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Business
French Connection’s overall results for the full year show an underlying group operating loss of 3.7 million pounds (4.4 million dollars) against 4.7 million pounds (5.7 million dollars) in 2016, a 21.3 percent improvement on the 52 Weeks to 31 January 2016. The company said, group revenue reduced by 6.7 percent or 10.1 percent at constant currency to 153.2 million pounds (185 million dollars) due to a combination of store closures (retail down 4.9 percent on an average space reduction of 11.7 percent), and a decline in wholesale, the majority of which occurred in the first half.
Commenting on the results, Stephen Marks, Chairman and Chief Executive said in a statement, “We have seen an improvement in performance over the financial year with continued good progress in the UK/Europe retail business, but as previously reported, this has been partly held back by the wholesale and licensing divisions, particularly in the first half of the year. The reaction to this year’s collections has been very strong so far with sales both in our stores and wholesale customers up on last year.”
Retail revenues declines 4.9 percent
Retail revenue for the year was down 4.5 million pounds (5.4 million dollars) to 87.9 million pounds (106 million dollars), 4.9 percent on the comparable 52 weeks and 6.5 percent at constant currency. Loss before taxation, was 5.3 million pounds (6.4 million dollars) compared to 3.5 million pounds (4.2 million dollars) in 2016, with net store closure costs of 1.6 million pounds (1.9 million dollars).
During the year, the company opened one new store and two concessions, but closed nine non-contributing stores and three concessions, resulting overall in nine less locations. French Connection also restructured the lease on the Oxford Street store, which has resulted in a reduced term. The company ended the year with 124 operating locations.
On a like-for-like basis sales in UK/Europe grew by 4.4 percent, while total ecommerce revenue grew by 12.7 percent, representing 27.3 percent of total group retail sales, up from 23 percent in 2016. The overall performance in the year saw the retail division reduce its loss to 9.8 million pounds (11.8 million dollars) against 15.6 million pounds (18.9 million dollars) reported last year, a 37.2 percent improvement on the prior period through growing like-for-like sales, closure of non-contributory stores, continued cost control and improved ecommerce sales. Wholesale revenues of 65.3 million pounds (79 million dollars) were 9.1 percent or 14.7 percent (on constant currency) lower than prior period driven by the 16.9 percent decline in first half which was impacted by poor sell through in previous seasons.
In the second half UK/Europe was down 1.5 percent due to phasing of Spring 17 deliveries. Unfortunately, the company said, following the disappointing sales performance in the first half of the year, together with reduced margins through stock clearance, wholesale’s profitability reduced to 10 million pounds (12 million dollars) compared to 13.3 million pounds (16 million dollars) in 2016.
Revenue performance better in UK/Europe than other geographies
The company said, geographical revenue break-down is more weighted to UK/Europe representing 76.4 percent of group revenues as a result of challenging trading conditions in North America and reduced stores in UK/Europe. Of the overall 1 million pounds (1.2 million dollars) improvement in underlying operating profit, 2.7 million pounds (3.2 million dollars) was contributed by UK/Europe. North America was down 0.7 million pounds (0.8 million dollars) as a result of a poor first half and Rest of World was down 1 million pounds (1.2 million dollars).
The net income received from global licensing was 6.3 million pounds (7.6 million dollars) in the year against 7.3 million pounds (8.8 million dollars). The company said, while furniture licensee DFS continues to perform very well there was a gap in perfume licensee in the year and North American footwear licensee filing for Chapter 11 resulted in lower licensing income than the prior year.
Gross margin at 45.8 percent was 50bps lower than the prior period through old stock clearance. As the proportion of outlet stores increases relative to full price stores, French Connection said, this has an impact on margin with retail gross margins at 56.8 percent, down 50bps on 2016. Due to continued levels of clearance of old stock, wholesale gross margin declined by 130bps.
Summing up
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