French Connection touts 'huge' overseas potential after tripling profits

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The Independent Online

French Connection, the fashion retailer, is cranking up its international expansion after more than tripling profits over the half year.

But Stephen Marks, the group's chief executive and chairman, said that trading conditions on the UK high street remain "tough" and are likely to remain so until "every one has got a bit more money in their pocket".

Over the six months to 31 July, French Connection's pre-tax profits rose to £700,000, up from £200,000 last year. They were boosted by a sharp jump in wholesale and licensing income and a 4.6 per cent leap in like-for-like sales at the company's UK and European retail business.

However, the group cautioned that its growth in profitability had been "hampered" by lower gross margins, which arose from it largely absorbing the increase in VAT and rising input costs, such as higher cotton prices.

Mr Marks struck a bullish note on its half-year performance and the group's expansion opportunities overseas through its franchise and joint venture partners. He said: "It just shows we are back in a growth pattern. Our international business is growing and has huge potential and our UK sales were not too shabby."

French Connection was restructured in 2010, quitting its Japanese business, selling the loss-making Nicole Farhi brand and reshaping its US operation.

But it is stepping up its expansion overseas through its partners. In the second half of its financial year, French Connection will add 16 new stores across China, Hong Kong, Russia, South Korea, Lebanon and Jordan. These will bring its total franchised shops to more than 200 in more than 20 countries.

Mr Marks said: "This is a global brand and there are not many global brands at our level." While sales growth in Russia and China was marginally ahead of other territories, Mr Marks said India is "going extremely well" and is on track to double its store numbers over the next three years.

The group's founder said: "We are opening in South Korea for the first time later this year. We are already in Lebanon, and South America is on the drawing board." Over the half year, French Connection's revenues jumped by 7 per cent to £102.8m. In the UK, the retailer basked in a strong performance during the April heatwave, when it also benefited from a glut of bank holidays, including the Royal wedding.

Although its UK sales slowed in May and June, French Connection enjoyed a "very good" performance during its summer clearance sale. Asked about UK trading conditions, Mr Marks said: "They are tough – no doubt about that." But he said: "The Olympics should be good for the UK and the London area."

French Connection, which has no debt, delivered £30.9m of cash over the half year. It increased its interim dividend by 20 per cent to 0.6p.