The Investment column: Stylish season for French Connection

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The Independent Online
What a difference a year makes. Twelve months ago fashion group French Connection was looking distinctly frayed at the edges. Two profits warnings during 1995 had knocked the shares down to 149p and investors were wary after problems in the US and the wholesaling division.

Since then the group's fortunes have been resurgent. Upbeat trading statements have helped the shares to double in value in the year and they surged to a high of 345p this week. With full-year profits just ahead of expectations at pounds 6.2m profit taking yesterday sliced 20p off the stock to 325p.

Even so, the French Connection recovery has been impressive. The French Connection and Nicole Farhi retail formats have traded well with like- for-like sales up by 21.6 per cent across the group, though this was from a low base the previous year. The sales were boosted by better product, competitive pricing and the more buoyant mood on the high street.

With much of the cost base fixed, the higher sales dropped through to the bottom line and profits in the retail division shot from pounds 800,000 to pounds 2.9m in the year. Current trading is more mixed, with the UK still showing same store sales growth of 20 per cent. But in the US the spring season has been slower.

Looking forward the group is planning to add to its portfolio of 29 UK stores and 13 in the US. Four more will open in each region this year, increasing the selling space by 30 per cent. It also plans to extend its franchise operation with three stores this year. More concessions will open in Denmark while the Hong Kong business will be developed.

The aim is to make both French Connection and Nicole Farhi global brands and chairman Stephen Marks is currently visiting Japan to develop the concept there.

On NatWest's forecasts of pounds 7.3m this year the shares trade on a forward rating of 16. After the recent run that is probably about right.