Mar 13, 2013
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French Connection sees online sales boost

Mar 13, 2013

LONDON - Fashion retailer French Connection aims to break even or post a profit by January 2015 as growing online sales help it recover from a loss last year, the company said on Wednesday.

French Connection spent 1.3 million pounds closing underperforming stores last year, but said it had already seen better performance in 2013, helped by its online business which now accounts for over 10 percent of British and European sales.

French Connection Spring-Summer 2013 (photo: French Connection)

The British company posted an underlying pretax loss of 7.2 million pounds ($10.7 million) for the year to end-January, compared with a pretax profit of 4.6 million pounds for the previous year.

Full-year revenue slumped 8 percent as like-for-like sales declined 7.4 percent in French Connection's core British and European market, where worries over unemployment and austerity measures have led consumers to keep a tight rein on spending, and 4.1 percent in North America.

"We've seen improvements in trading but we expect those to build through 2013. Our overall target is to reach breakeven - at least breakeven - by January 2015," chief operating officer Neil Williams told Reuters.

"One place that we have been continuing to invest and invest more is on the e-commerce side. We're expanding the marketing we're doing, we're expanding the number of people we've got on that side of the business just because that's the way people want to shop so you've got to be there and doing a good job."

The group has also reduced inventory levels, redesigned product ranges and increased the flexibility of its buying teams as well as reviewing pricing as part of a plan to restore the fortunes of its retail division.

In implementing these measures, the group is on the right track, but the process may take a little longer than the planned two years, said Cantor Fitzgerald retail analyst Freddie George.

"My hunch is that over time they're going to have to be a bit more radical on the restructuring going forward ... When people go in there to buy products they have been historically put off by the prices," said George.

The British company, previously known for its FCUK brand of clothing and accessories, warned in January it would make a bigger loss for the full year than the 5.47 million pounds analysts were expecting according to Thomson Reuters I/B/E/S.

French Connection's shares dropped 11 percent after the warning, having lost as much as 23 percent in September when it reported a half-year loss. The stock was trading 6.1 percent higher at 26 pence by 0910 GMT on Wednesday.

Zara owner Inditex posted 22 percent growth in net profit as it tapped fashion-hungry consumers in new markets even as austerity-hit shoppers in Europe tightened their belts.

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