Losses at the fashion retailer grew to £3.5m for the six months to 31 July, compared to £2.5m last year. This included a £1.9m exceptional gain following a property disposal. Turnover improved from £109.4m to £112.4m as growth in ladieswear offset weaker wholesale markets.
The real problem has been the squeeze on margins from higher costs. The cost base has come under pressure from new department store concessions, a strong Euro and higher raw material costs. However, the group still expects to make a profit for the full year and maintained the interim dividend at 1.7p.
Like for like sales in ladieswear grew 8% over the period, which is significantly higher than anything reported by the peer group. Next, for example, saw like for like sales down 6% over a similar period. Overall like for like sales were flat. The wider sales growth for the group came from the introduction of new concessions in Harvey Nicols and House of Fraser.
Among the group’s other brands, Toast reported stronger results, while results from Nicole Farhi, Great Plains and YMC were all satisfactory. The UK and Europe were stronger than the US, where the consumer slowdown was more apparent.
The shares dipped 1.75p to 63.75p. They were still trading at above 250p as recently as 12 months ago, but the group has been hit hard by negative sentiment towards the retail sector.
French Connection has certainly improved its proposition from a few years ago and now stocks quality basics blended with fashion. Its clothes look good value compared to many of its high street peers and it appears to have improved its erratic sizing strategy. While it may be a little soon to buy into the retail sector yet, French Connection’s growth in ladieswear is both encouraging and surprising in this environment. It remains one to keep an eye on.