Interim Management Statement

FRENCH CONNECTION GROUP PLC

Interim Management Statement

17 May 2012

French Connection Group plc is announcing its Interim Management Statement covering the 15 week period to 17 May 2012.

Trading update

Group revenue in the first three months of the financial year was 9.5% below the level achieved in the same period last year, heavily impacted by disappointing sales volumes in the UK/Europe division. 

Revenue in UK/Europe retail was 10% below last year in total and 12% lower on a like-for-like basis. As highlighted with our full year results, stronger demand for discounted product during the winter sale in the early part of the period has resulted in a lower gross margin. In the period we launched two new ranges, the Premium Collection and French Connection Home, which have both been well received and have performed well. We have also seen good growth through our eCommerce channel helped by continued investment in online.

As reported in March we are conducting a thorough review of the UK/Europe retail operation. We have appointed external specialist advisors to support management in this process and are working quickly towards delivering both short-term gains and long-term strategies to improve the sales densities and gross margins within our retail portfolio. We also continue to work hard actively managing our retail store portfolio including lease re-negotiations.

The UK/Europe wholesale division has continued to perform in-line with our expectations, although revenue in the period was lower than last year as in-season repeat orders have slowed. Forward orders for Winter 2012 are currently slightly below the levels at this time last year.

The profit improvement in North America has continued, particularly supported by wholesale revenues in the US. We achieved an 11% increase in revenue in the region during the period and the net operating result was well ahead of the previous year. Our international licensed retail partners and brand licensees also continue to perform well and continue to pursue their expansion plans.

Our balance sheet remains strong with £11.3 million of net cash at the end of April 2011 (April 2011: £18.5 million), the reduction reflecting the decline in revenue during the period along with other temporary working capital movements. 

Outlook

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. We therefore remain cautious about the outlook for the rest of the financial year. Given this, it appears unlikely that our profit performance for the full year will meet current market expectations. Addressing this, the review of our UK/Europe Retail business is well underway and we expect to identify initiatives that can be implemented in the short-term as well as longer-term strategies for improving the performance of the business.

Other than as detailed above in this Interim Management Statement or in the Annual Report published on 17 April 2012, there have been no material events or transactions in the period from 1 February 2012 to 16 May 2012.

Enquiries:

Neil Williams/Roy Naismith French Connection +44(0)20 7036 7206

Kim Fletcher/Catriona McDermott Brunswick +44(0)20 7404 5959