French Connection slumps to bigger loss than expected

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The Independent Online

French Connection capped a series of seven profits warnings with a bigger-than-expected interim loss yesterday, but the fashion retailer insisted its latest clothing collection had been much better received by consumers.

The company, which has struggled for the past couple of years, has enjoyed a 9 per cent jump in sales in its retail business in the past three weeks when its autumn/winter range has been available. French Connection said the performance was "encouraging" and it was planning for a 3 per cent rise for the second half. Particular hits have been a red woollen coat for women and a gold evening dress costing £130.

However, forward wholesale orders for this winter - French Connection clothing is available in some department stores - are 15 per cent below levels at this time last year and orders for summer 2007 are flat.

Stephen Marks, the founder and chairman, said: "We are in reasonable shape in the first few weeks but it's early days. I am looking forward to a profit at the end of the year."

He said wholesale sales normally lagged the retail business by six months. The company said it was "comfortable" with City forecasts that predict a £4m profit for the full-year.

For the six months to the end of July, group turnover fell 6 per cent to £111.2m, as the company slumped to a loss of £3.6m compared with a £5.1m profit for that period in 2005. Within that, UK and European like-for-like retail sales were flat, while sale revenues crashed 25 per cent. In North America, sales dropped 10 per cent but wholesale revenues improved 12 per cent.

Mr Marks said: "The challenges we faced during the last financial year have continued to impact trading in the new year. It has taken longer than we had hoped to translate the changes we made in our business into sales growth."

He said the problem was that the product line-up was not strong enough because the company's past success made it complacent and was creating ranges by "remote control". "That was a blip, which we have hopefully set right and we can move forward again," Mr Marks said.

He again rejected criticism that the clothing was priced too high and dismissed suggestions he might take the company private.

Richard Ratner, at the broker Seymour Pierce, said: "It looks as if the company has begun to turn the corner, but it could be a slow process due to the fact that wholesale business lags by one to two seasons. Even so, it is particularly encouraging, as, at present, 'young' or 'aspirational' fashion is not reported to be having a good time generally."