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French Connection to review retail after profits slide

French Connection is reviewing its retail operations after posting a 32% drop in pre-tax profits for last year.

For the year to January 31 profit before tax dropped to £5m from £7.3m the year before. Revenues rose 5% from £205m to £215.4m.

The UK/Europe wholesale division saw solid growth achieving a 17% increase in revenue for the year. Brand licensing income also grew strongly, increasing by 47% to £8.5m from £5.8m last year.  

However overall the UK/Europe retail business generated a loss of £8.2m compared with a loss of £1.6m in the previous year. Total retail revenue in the UK/Europe division was largely flat on last year with a 4.6% growth in the first half and a decline in the second half. Womenswear and menswear sales were similar with the ecommerce channel performing in line with the retail stores.

French Connection’s Toast and YMC businesses continued to achieve growth in like-for-like sales despite the current retail situation, albeit at a low level.

Chairman and chief executive Stephen Marks said: “During the past year our wholesale, international and licensing businesses have performed well, however, in the most difficult winter season I have seen in all the years I have been in business, our UK retail division has been very disappointing and this has had a significant effect on our results for the year.”

He added: “In the light of the performance of the UK retail division we are reviewing our retail operations in order to improve sales and margin in this core business. We are very aware that there will be no quick solutions and that changes we make will take time to have an impact. We are working very hard on improving the performance of the retail stores, although clearly the state of the UK economy is not helping the position. 

“We have demonstrated our ability to produce fashionable, wearable products over the last 40 years and will continue to do so.  With the help of the review of operations, a strong balance sheet and our global brand, we will return the business to the level of profitability we feel the group deserves.”

The retailer said it will further expand its international operations in the coming year after reporting a “significant improvement” in operating profits for North America, a good performance from licensees in Asia and Australia and joint ventures in Hong Kong and China achieving growth in like-for-like sales.

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