French Connection fails to reverse sales decline

The company said its retail division's sales would be 'materially lower than expected'

Not riding up with wear: shares in the fashion retailer plunged by 26 per cent as a shock profit warning compounded years of losses

French Connection’s hopes of turning around after three years of losses were dashed yesterday as the fashion chain issued a shock profit warning and said it would double the number of store closures.

The warning sent the share price tumbling 26 per cent to a 15-month low of 39p as the company was unable to explain exactly where the problems with the business lay.

In a terse statement, the company said its retail division’s sales would be “materially lower than expected” but that licensing and wholesale remained on track.

Analysts quickly cut their forecasts for the struggling chain, warning that it would make a £3.5m loss versus original expectations of a £400,000 profit. Last month the company revealed a full-year pre-tax loss of £800,000.

French Connection said it would now shut seven stores this year, instead of the three to four stores initially expected, as it hoped to stem the flow from loss-making sites.

Freddie George, a retail analyst at Cantor Fitzgerald, suggested the problems at the retailer were twofold, with fashion chains across the high street suffering and the company itself producing a lacklustre range of clothes.

He said: “The ranges aren’t as strong. Last year they looked a lot brighter – they had a lot of strong accessories and shoes – but that’s not there now. Menswear has been weak for nine months and the store has lots of occasionwear, while accessories are not there. It’s very disappointing.

Mr George added: “It’s not been a great first quarter in the retail sector. Generally apparel fashion has been weak in the first quarter and my hunch is people are saying, ‘we’ll buy a car, or do a bit on the house’ and channel that instead of fashion.”

He also suggested some of the problems could be down to founder and chief executive Stephen Marks. “He signs everything off but he’s just one person. You can get it right sometimes but you can also get it wrong,” he said.

Earlier this week the British Retail Consortium said overall high street sales rose 3.2 per cent in March over March last year, but this was flattered by the Easter weekend falling in the month versus April in 2014. It said fashion stores experienced a “subdued” month as colder weather made spring and summer ranges “less appealing” to shoppers.