12th Mar 2014 09:46
LONDON (Alliance News) - Fashion clothing retailer French Connection Group PLC Wednesday said it narrowed its financial losses in the financial year just ended, by reducing its store portfolio and reducing operating expenses, as it attempts to restore the business back to profitability.
The retailer said trading in the second half of the year improved in the UK and Europe, with like-for-like sales growth of 1.4% in the second half, compared with a like-for-like sales decline of 4.5% in the first half of the year.
French Connection said it improved its margins in both the UK and Europe wholesale and retail divisions, as it sold more full-price and higher-margin items and limited discounting, during a time of increased promotional activity.
A year ago, at the time of its full-year results for the year ended January 31, 2013, Chief Executive Officer Stephen Marks said the group would be "managing the business tightly in order to increase full-price sales volumes, limit discounting, manage inventory levels and control cash".
A year on, and for the financial year ended January 31, 2014, French Connection reported a pretax loss of GBP6.1 million, compared with GBP10.5 million the prior year, and booked exceptional costs of GBP1.7 million, associated with its store disposals and closures.
It said group revenues for the year declined by 4% to GBP189.4 million, largely due to the reduced store portfolio.
Shares in the retailer jumped 16% after it issued a trading update on February 5, saying it was expecting to report a loss before tax and exceptional costs of GBP4.7 million for the full-year, a significant improvement when compared with the GBP7.2 million loss it reported a year earlier, when it was hit by poor retail trading and volumes declines in the UK and Europe, as well as store disposal costs and GBP2 million in goodwill impairment.
The group ended up reporting on Wednesday an underlying operating loss of GBP4.4 million for the year, as it reduced operating losses in its retail division by GBP3.8 million over the year, having lowered labour costs and closing nine non-contributing stores. The group said it plans to close a further three to five non-contributing stores during the current year.
In its wholesale division, the group said that better trading in the UK and Europe was offset by tough trading conditions in North America.
"In International markets, in our joint ventures in China and Hong Kong, additional stores were opened and with positive like-for-like sales, the share of profit from joint ventures increased. In North America, the apparel market has been weak in 2014 and we have not been immune to the effects of this," the company said in a statement.
French Connection said that retail sales and margins in the UK and Europe were both better than expected in the December to January period, with a strong UK wholesale forward order book and shipments ahead of the previous year.
The retailer said is closed the year debt-free, with GBP28.2 million in cash, supported by a tight control on working capital. Again the group did not pay a dividend for the year to "conserve working capital", it said.
"I am pleased that the initiatives we put in place to drive a turnaround in our trading performance have delivered better-than-anticipated results and that they continue to gain traction," said Marks.
"We strengthened management across our business resulting in improvements in performance. Our new design team is working well; changes in our retail buying resulted in much better stock control; stores are operating more efficiently and the investment in our ecommerce business delivered good results.
The group said that e-commerce currently represents 20% of group retail sales, a figure it sees rising in the future, as it continues to invest in online.
Shares in French Connection were down 4.8% at 60.00 pence in trading Wednesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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