18th Sep 2014 09:02
LONDON (Alliance News) - Shares in French Connection Group PLC fell Thursday despite the fashion retailer reporting a sharp reduction in losses for the first half of its financial year, as revenue declined and it gave a cautious outlook for the remainder of the year.
The stock was quoted at 64.71 pence, down 7.6% about mid-morning.
"Given the very competitive market place and tougher [like-for-like] comparatives in the period, we remain cautious about the second half where, as ever, we are dependent on the very important Christmas trading period," said said Chairman and Chief Executive Stephen Marks in a statement.
Even so, the high street fashion retailer said its expects its full-year results to be in line with market forecasts.
"We expect the results for the full year to be in line with market expectations, setting the group up for further progress as our initiatives continue to gain traction," said Marks.
The clothing and accessories retailer reported a pretax loss of GBP3.9 million for the six months to end of July, compared with a GBP6.1 million loss in the first-half of last year.
It said improvement in both its retail and wholesale divisions, increased licence revenue and lower operating expenses, helped reduce its loss.
Revenue in the period fell by 6.6% to GBP84.0 million in the recent year from GBP89.9 million the year earlier, which the company said was due to planned store closures and exchange-rate movements, notably the strength of sterling.
French Connection said underlying UK and Europe like-for-like retail sales were up 6% at constant currency, and up 1.1% on a reported basis, driving a stronger gross margin as its sold more full price goods. However, the retailer said some of the gains were offset.
"This improvement was offset by increased discounting required in North America and the increased proportion of revenue coming from Wholesale," the company said.
Outside the UK, French Connection said trading in North America and the Rest of the World is more tough. In North America, it has been hit by a weak apparel market.
"Whilst trading conditions remain tough, the trends are stabilising. We have a new USA CEO who is focused on driving an improvement in the performance of the division," the company said.
Going forward, the retailer said it is "cautiously investing in growth".
"The initiatives we put in place to drive a turnaround in our trading continue to deliver an improvement in performance. Whilst costs will continue to be managed tightly, we are cautiously investing in growth opportunities, trialling new store formats and developing our international business," Marks said.
French Connection said the Winter 2014 order book is up on last year and initial Spring 2015 orders are strong.
The company has not paid a dividend for several years, but said Thursday that it will "review the dividend policy closely at the year-end".
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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