French Connection issue 2nd profit warning

Ailing retailer French Connection has issued a second profit warning after its sales plummeted a further 9.5% due to disappointing European sales volumes. The first profit warning was issued in February when the company downgraded its pre-tax

profit from £5m for the year to January 31 to £4.7m and after a disappointing Christmas.

Pan-European sales fell 10% compared to the same period last year, and 12% down on a like-for-like basis. The company said stronger demand for discounted product during the winter Sale resulted in a lower gross margin.

French Connection in an interim management statement said: “The UK retail market remains particularly challenging and the combination of prevailing consumer caution and ongoing economic difficulties suggests that this will not improve in the second half of the year." Therefore it “appears unlikely that profit performance for the full year will meet current market expectations”.

Profits for its North American arm continued to improve with an 11% increase in revenue in the region during the period. French Connection’s ecommerce channel also saw good growth during the period.

A year of high street gloom has seen French Connection's share price more than halve since the year high of 134p in March 2011.

French Connection returned to profitability last year – after reporting losses in 2009 and 2010 – following a reorganisation which involved selling the Nicole Farhi brand.

Image: French Connection