Fashion catches high street chill

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The stitching has rather come undone at French Connection over the past year. Shares in the fashion retailer and wholesaler were up to nearly 300p last spring, but have since sunk to half that level after a series of profits warnings.

Yesterday they slithered a further 23 per cent to 145p after the company issued yet another warning. Profits for the year to January are now set to be in the region of pounds 3.4m, less than half the pounds 6.9m achieved last year.

The key problem has been tough trading conditions, both in the UK, where the company has 30 shops, and the US, where it has 11. Difficult trading has affected many recently, but French Connection seems to have suffered more than most.

In the UK, the autumn period was awful and in the US the company has been hit by frantic discounting from rivals.

French Connection has held its margins, by and large, but has suffered lower sales as a result.

These were just the external factors. Internally the company was not helped by poor buying of its autumn stock, which would not sell as a result.

That problem now seems to have been addressed and the summer 1996 collections of both the French Connection label and Nicole Farhi have been well received.

Sadly there was no news of current trading yesterday as it is so close to the company's year end in January. However, after the current cold snap it is unlikely to have been spectacular.

The good news is that the company is paying a 2p dividend, its first such payment since 1991.

Management is confident its strategy puts it on course for growth, but, judging by the share price, the market is not so sure.

Profits of pounds 3.4m for the year just ended puts the shares on a rating of 14, falling to 10 for the current year.

That reflects the uncertainty that tends to haunt fashion businesses, an uncertainty that seems likely to continue. Avoid.