French Connection sells Nicole Farhi brand for £5m

Retailer slumps to loss of nearly £9m after suffering 'very difficult' year

French Connection is to close most of its US operations and sell its Nicole Farhi brand, the fashion group said yesterday as it posted full-year losses of nearly £9m

But the retail and wholesale group touted a robust sales performance in the UK and Europe and said the overseas restructuring – which follows the closure of its Japanese and Scandinavia businesses – would see it return to profitability.

The Nicole Farhi business, which has lost money for a number of years, is being sold to the private equity firm OpenGate Capital for up to £5m.

The sale ends the business relationship between French Connection's founder and executive chairman, Stephen Marks, and Nicole Farhi herself, the mother of his daughter, Candice. Mr Marks first met Ms Farhi, who was an ambitious young designer at the time, in the early 1970s on a business trip to Paris, and she then started to freelance for him.

The couple launched the brand under French Connection's ownership in 1982 but ended their personal relationship at the end of the 1980s. Now grandparents, Mr Marks and Ms Farhi – who is now married to the playwright Sir David Hare – have remained good friends. Ms Farhi will remain creative director at the eponymous brand under its new owners.

The 23 Nicole Farhi stores and concessions in the UK will either be "transferred or closed", the company said.

Mr Marks yesterday said the strategic review which began in 2009 was now "complete". He added: "This has been a very difficult year, however, I am confident that the changes we have made will create a solid base for the development of the business and will enable the group to return to profitability in the near future."

For the year ended 31 January 2010, French Connection suffered a pre-tax loss of £8.7m, compared with an £11.8m loss last year. The group's performance has waned since 2004 when its former FCUK slogan reached the peak of its popularity. Its revenues flatlined at £214m last year.

French Connection is to close 17 of its 23 stores in the US at a one-off cost of about £6.5m, although this will lead to a £3.2m reduction in its annual losses. Neil Williams, the chief operating officer of French Connection, said: "We could not see the [US] stores returning to profitability in a reasonable time." French Connection's US business will now largely focus on wholesale, such as its offer in the Bloomingdale's department stores, and e-commerce.

In October, French Connection revealed it was to close its 21 Japanese stores, the last of which will close this week. However, Mr Williams said it was in discussion about re-entering the Japanese wholesale market.

The group said the total restructuring costs, including the closure of its US and Japanese business, would result in exceptional costs of £13.1m.

Last year, French Connection also closed its retail operations in Denmark and Sweden.

Over the year, French Connection's retained businesses in the UK and Europe delivered a 2.8 per cent uplift in underlying sales. But its womenswear business again outperformed menswear. Mr Williams said: "We have put a lot of effort getting the [menswear] product right and that is starting to come through." Toast, the group's upmarket fashion, homewares and accessories chain, posted total sales up 16 per cent over the year. Overall, French Connection's retained businesses made a pre-tax profit of £1m.

Mr Williams said that French Connection's wholesale orders for the autumn/winter season were ahead of the same period last year, which had not happened for three years.

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