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Tag: French Connection

  • French Connection will collapse without fresh investments

    French Connection will collapse without fresh investments

    Without securing an imminent financial lifeline, ailing UK-headquartered fashion chain French Connection is likely to collapse. The Retail Gazette reports the company has warned that if urgent funding is not secured its cash resources will be eroded within the next couple of months. Like most retail chains entering administration or bankruptcy – or likely to – French Connection was in trouble well before Covid-19 destroyed the brick-and-mortar retail sector this year.

    For the 12 months to January 31 last year, the company’s operating loss almost tripled, from £3.8 million (US$4.97 million) in 2018 to £9.3 million ($12.2 million). It did, however, record an underlying profit, a somewhat modest £100,000 which was a stark contrast to the previous year’s £2.1 million loss.

    With falling sales – both at home and in markets like Asia and Australia – French Connection has been reducing its store network for years. Founder and CEO Stephen Marks has been seeking a buyer for the company since mid-2018 while in the meantime trying to right-size the business.

    This week the company said that having agreed to new payment terms with suppliers, negotiated rent relief with landlords, and reduced its factory orders as the Covid-19 crisis impacted its sales, the company was confident of securing funding to survive.

    Online sales during the last six weeks have been up 44 percent in both the UK and the US.  But Sofie Willmott, lead retail analyst at GlobalData, says the online channel accounted for only around a quarter of revenue prior to Covid-19. “In addition, online revenue fell 8.1 percent to the end of January, highlighting that its strong digital performance is coming from a low base and is not as impressive as it first appears.”

    French Connection said in a statement reported by Retail Gazette: “In the light of the company’s current cash position and the continued expected weak trading environment, we have been inactive discussions with a number of potential funding partners.”

    “This process is proceeding well and we are making good progress on due diligence and agreeing on terms.”

    French Connection – once internationally famous for printing its initials FCUK on its t-shirts – has fallen from consumer favor since its heyday. In September 2016, Sarah Johns, of GlobalData predecessor Verdict Retail, observed of the brand: “The FCUK branding on selected lines is outdated, collections can be hit-and-miss while upper-mid and premium price points make it difficult for shoppers to justify paying full price for items when similar styles and quality can be found elsewhere for less.”

    Those comments followed the company reporting a first-half loss of £7.9 million.

    “The clothing and footwear retailer is struggling to compete with the likes of H&M, Zara, Topshop, Asos and Coast due to its inability to communicate clear brand identity and gain a loyal customer following.”

    Nearly four years on, little has changed. Today, Willmott described French Connection’s prospects as “bleak”.

    “French Connection’s brand desirability has continued to dwindle as designs lack originality, and therefore struggle to excite shoppers or justify premium price points. With its close competitor Reiss far outperforming (pre-Covid-19) and French Connection failing to find a buyer, after being for sale for a significant period of time, it raises the question once again whether French Connection can rebuild relevance as it will fail in the post-Covid-19 market if a product, pricing, and branding remain unchanged.”

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  • French Connection sales fail to inspire customers

    French Connection sales fail to inspire customers

    The latest French Connection sales figures will do little to inspire prospective bidders as the company searches for a white knight.

    Pippa Stephens, retail analyst at GlobalData, says that despite the French Connection sale process being extended by three months in June, the ailing retailer has prolonged this further, as it continues talks with “several interested parties”.

    Group sales for the first half were down £7.1 million – by 12.2 per cent – to £51 million, and underlying profit remains in the red.

    “Its performance is doing little to assure prospective buyers of its future potential, however new ownership should allow for an essential revamp of its ranges and store estate to try to regain appeal among shoppers,” says Stephens.

    “French Connection’s product offer lacks originality and direction, with limited newness across seasons, lagging behind other premium competitors like Whistles and Reiss, so a fresh perspective from its design team is crucial to reignite shopper interest.”

    Although group sales are still declining due to store closures and a shift in wholesale orders into the second half of the year, the retailer’s UK/Europe like-for-like sales show an improvement having shuttered nine underperforming locations in the first half, including two off-price outlets.

    “French Connection must continue to review its remaining estate and carefully plan to transition customers to its online platform to avoid shopper desertion – especially its department store concession customers,” says Stephens.

    “Its new concept store in London, which opened in July, has shown reassuring results, with exclusive products, a large homewares offer and a coffee shop supporting footfall. If successful, this should be rolled out to a handful of its large regional stores to help reinvigorate the brand and improve shopper perception.”

    French Connection sales online have continued to decline, down £600,000, or 9.6 per cent, during the first half, despite the UK online clothing market forecast to grow by 7.4 per cent this year.

    “With a greater focus previously put on third party operations, such as Next and Asos, French Connection must ensure that this does not cannibalise its own sales. It needs to invest in its own website, with shorter delivery lead times, and enhanced style inspiration to increase engagement,” concludes Stephens.

  • French Connection brighter future

    French Connection brighter future

    UK fashion retailer French Connection has recorded another massive loss – which overshadowed a milestone improvement in underlying profit.

    For the full year to January 31, the company’s operating loss almost tripled, from £3.8 million (US$4.97 million) the previous year to £9.3 million ($12.2 million).

    However for the first time in seven years, French Connection’s achieved an underlying profit, a somewhat modest £100,000 which was a stark contrast to the previous year’s £2.1 million loss.

    In what the company described as a “tough” trading environment, sales fell 10.6 per cent overall, or by 6.8 per cent on a like-for-like basis, to £58.4 million.

    While figures were not released for the brand’s Hong Kong sales, the company said shipments to its partners there and in Australia reduced during the year.

    The company is continuing to close stores. During the last five years it has reduced its store count by more than half, and currently has 96 standalone stores and 195 franchised and licensed stores worldwide. Nine more are slated for closure this year.

    However, wholesale sales rose 10.3 per cent to £76.9 million in the UK, Europe and North America, which drove group revenue up by 0.2 per cent year on year to £135.3 million.

    “I am pleased that we have achieved our target of returning the group to underlying profitability this financial year,” said CEO Stephen Marks.

    ”This is only part of our overall journey, however it represents a significant achievement given the results over recent years.

    ”This has been achieved despite the ongoing difficult retail trading environment in the UK and is the result of the changes we have made in all areas of the business to adapt to the ever evolving markets in which we operate.

    ”While we still have a way to go to return the business to an appropriate level of profitability, I believe that we have made and continue to make significant progress.”

    GlobalData senior retail analyst Sofie Willmott said French Connection’s “more subtle brand handwriting fails to stand out” against more distinctive players such as Ted Baker, Reiss and Whistles, which all have a clear design direction.

    “To return to like-for-like growth, French Connection must give consumers a clear reason to shop with the brand by refining its range,” she said.

    “French Connection has got a hard slog ahead. As consumer confidence is expected to remain low this year, the retailer must better define its brand identity and point of difference to both convince a buyer it has future growth potential, and to attract shoppers back.”

    Marks said talks are continuing on a potential sale of French Connection.

  • Stephen Marks mulls French Connection sale

    Stephen Marks mulls French Connection sale

    French Connection founder and CEO Stephen Marks plans to sell his remaining cornerstone stake in the fashion label.

    Sky News UK has reported Marks has engaged Numis Securities to approach prospective buyers for the 42 per cent stake in French Connection which he still holds. He founded the brand back in 1969.

    UK media is reporting that should a buyer be found for the stake, it would almost certainly trigger a takeover bid for the entire company. A formal stock exchange announcement is pending.

    French Connection is emerging from a challenging period in its history after its hugely successful FCUK era brand positioning fell from favour in the late 2000s. In recent months, it has built strong sales online via Asos and it raised £23.3 million from the sale of 75 per cent of its Toast label in April to Danish retailer Bestseller United, parent of Selected, Vera Moda and Jack & Jones, among others.

    But the parent brand, now down to a store network of only about 30, recorded a like-for-like sales decline of 7 per cent in the half year to July 31 and a loss of £5.5 million. Marks, however, anticipates the business will be profitable by January with licensing income on the rise, reaching £2.6 million for the period, and wholesale revenues up 6.2 per cent.

    Any deal for Marks’ stake will be heavily influenced by the second largest shareholder in French Connection, Mike Ashley, who holds 27 per cent of the stock. Ashley recently bought out troubled House of Fraser and is CEO of Sports Direct.

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  • Vincom Centre Landmark 81 launched

    Vincom Centre Landmark 81 launched

    Vingroup has opened its 55th shopping centre, The Vincom Center Landmark 81 mall, in Ho Chi Minh City’s Binh Thanh district.

    The 50,000sqm shopping centre occupies six of the skyscraper’s 81 storeys, housing 100 domestic and international brands in cosmetics, fashion, F&B, and entertainment.

    Fashion brands include Versace Jeans, Calvin Klein, Adidas, Tommy Hilfiger, Lacoste, French Connection, Kimmay, Superdry, H:Connect; Cole Haan, Ecco, Dune London, Parfois, Aldo, Pandora, Longines, OWL and Nike.

    The 7000sqm food and beverage area features 30 restaurants, including China’s Peach Garden, Japan’s Dozo Sushi, Vietnamese restaurants Delights, Di Mai, and coffee shops including Starbucks’ largest Vietnam outlet and Highlands Coffee.

    In the entertainment area, there is a 2000sqm Vincom Ice Rink, Vietnam’s largest, and a CGV cinema complex including an Imax screen, as well as a tiNiWorld entertainment complex and an indoor games centre.

    Vingroup’s food arm VinMart operates a supermarket there.

    Go to gallery below to view the launching event :
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  • Fashion retailer French Connection’s shares jump on takeover hopes

    Fashion retailer French Connection’s shares jump on takeover hopes

    Shares in UK-based fashion retailer French Connection Group Plc rose more than 20 percent on Monday after a media report said overseas investors were looking to buy the lossmaking firm.

    The Telegraph newspaper had said on Saturday that interested buyers were thought to be a mix of European and U.S. private equity firms, as well as investment manager Neuberger Berman, and that French Connection had approached investment bank Moelis & Co (MC.N) for advice.

    French Connection and Moelis declined to comment. Neuberger Berman did not immediately respond to a request for comment.

    French Connection has struggled to compete in recent years against fast-fashion rivals such as ASOS, Forever 21 and Inditex’s Zara and has failed to report a pretax profit since the year ended Jan. 31, 2012 with critics saying it should ditch its 25-year-old FCUK logo.

    Private equity firms could be a natural fit for French Connection as they could push through operational changes to extract profit, and revive the company’s brand appeal, said Neil Saunders from retail consultant Conlumino.

    The retailer has been the source of takeover speculation in the past, and some industry experts said there was now more pressure on the company following years of underperformance and little sign of underlying issues being addressed, despite turnaround measures including store closures and the hiring of new management and design teams.

    Activist investment firm Gatemore Capital Management (GCM), which has an 8 percent stake in French Connection, would be supportive of running an open sales process, Liad Meidar, managing partner at GCM said in an emailed statement.

    GCM said it would be interested in a potential buyer looking to focus on increase the rate of store closures and improve gross margins in French Connection’s retail and wholesale business.

    French Connection needed to focus on fashion for 25- to 35- year-olds, said Gatemore, which last month urged the retailer to speed up its store closure program after its first-half results showed another loss.

    As of Friday’s close of 32.75 pence – a fraction of highs of more than 500p set in 2004 – French Connection had a stock market value of 31.5 million pounds.

    Any buyer will have to gain the backing of founder and executive chairman Stephen Marks, who still holds a 41.65 percent stake in the company as of March 15, according to Thomson Reuters data.

    British companies have become cheaper for overseas buyers in recent months as Britain’s vote to leave the European Union has driven the pound GBP= to its lowest in about three decades.

    French Connection shares were up 10 percent at 36p by 0721 ET on Monday.

  • Pizza Hut parent eyes French Connection sale

    Pizza Hut parent eyes French Connection sale

    The parent of the Pizza Hut business in the UK appears to be an unlikely bidder in the French Connection sale.

    Private equity company Rutland Partners is reported by the Sunday Times to have been in talks to buy the troubled UK fashion brand since early this year.

    French Connection, a decade ago infamous for its branding FCUK, has struggled for the last several years as its designers failed to capture consumers imagination with its offer. The brand seems caught in a rapidly shrinking middle market between fast fashion brands and the European-led luxury sector, its pricing aligned with neither end of the spectrum.

    The company is thought to have been unofficially on the market for more than a year, although Rutland is thought to be offering as little as £40 million

    A source told the Sunday Times it could not justify paying more than 40p a share for the business, which extended its losses five-fold last year on sales down 9 per cent to £164.2 million.

    Besides Pizza Hut, Rutland also owns electronics chain Maplin and the Bernard Mathews turkey brand.

    French Connection dates back to 1992 when it was founded as a womenswear brand by Stephen Marks, a year after the cult film of the same name was released. Menswear was added in 1976 and Marks grew the business to the point where its float in 1984 made him Great Britain’s 15th richest man. By the late 1980s it was in trouble and he bought back control of the business in 1991, launching the controversial FCUK brand and advertising campaign. That drove it back into a new era of success before consumers grew tired of the joke and it reverted to French Connection in 2005. By 2014 the retailer had 131 stores in the UK and Europe and it wholesales stock and supplies franchises internationally.

    Ten years ago the company’s shares traded at £2.40 each, and Gatemore Capital Management, which holds 8 per cent, values the stock at £1.50.

    Robert Stockdill

  • French Connection on comeback trail

    French Connection on comeback trail

    UK fashion chain French Connection has reduced its full year loss as sales recover.

    FCUK has reported an £800,000 underlying operating loss for the year to January 31 – vastly better than the £4.4 million loss in the year to January 31, 2014.

    The retailer, once notorious for its casual fashion items bearing slogans with its abbreviated name FCUK, had fallen out of favour with customers when the ‘joke’ wore off. It subsequently changed its labeling to French Connection and tried to move more upmarket path with its design positioning. But that change took years to gain favour with shoppers.

    The company spent the last year closing unprofitable stores and redesigning its product range.

    Announcing its figures this week, FCUK said same store sales across the UK fell by three per cent year-on-year, citing unusually warm weather in the second half of the year for the drop, in concert with its rivals.

    Wholesale revenues rose 4.6 per cent.

    Chairman and CEO Stephen Marks said despite “difficult retail trading conditions” in the second half the results demonstrated the company has made another step towards returning to profitability.

    “Although we are encouraged by forward orders in our wholesale business, trading on the high street remains challenging and we are planning accordingly.”