As French Connection faces accusations that its FCUK slogan cheapens the brand, Drapers looks at the fortunes of the womenswear retailer and whether it should scrap its infamous logo for good.
French Connection spring 16
French Connection’s tongue-in-cheek FCUK logo came under fire yesterday from disgruntled investors Gatemore Capital, a US-based fund with an 8% stake in the company, who said it is “no longer aspirational”.
In a letter seen by Drapers, Gatemore managing partner Liad Meidar urged French Connection to “move on” from the FCUK logo in key markets like the UK, Europe and North America and argued the brand should concentrate on appealing to its core 25-35 target market, rather than younger consumers.
The controversial and once incredibly popular slogan had been in retirement since its heyday in the late 90s and early 2000s, but reappeared on T-shirts and sweatshirts for the brand’s spring 16 advertising campaign, as the ’90s revival swept the high street.
However, as concerns grow about French Connection’s performance – particularly after it announced a pre-tax loss of £3.5m in the year to January 31 2015 earlier this year, up from losses of £1.6m the year before – it appears investors no longer find the joke funny.
But not everyone agrees that the FCUK logo needs to be consigned to history for good. Kam Harris, founder of fashion agency Brand National, says that although she can understand Gatemore’s perspective, FCUK has become an important part of the brand’s heritage.
“I think the FCUK logo is synonymous to the brand and nods back to its heyday. I’m not sure it cheapens the brand.
“If you say FCUK to any retailers they will know what you mean and I think the brand has actually gone beyond that logo. I don’t think the majority of customers dislike it and the brand is lucky enough to enjoy a wide customer base across several sectors.”
Nivindya Sharma, senior analyst at retail consultancy agency Verdict Retail, says the brand’s problems run deeper than a potentially outdated slogan. “It’s interesting that French Connection wasn’t able to capitalise on the 90’s trend with the FCUK slogan, which should really tie into the ironic sense of humour that’s been so popular on the high street over the past couple of seasons. The bigger problem for French Connection is its higher price point. It doesn’t fit in anywhere on the high street.
“People are prepared to pay more if the product is good enough, but I question what French Connection has to offer that’s different. You can find all of its design somewhere else on the high street for much cheaper. If you look at retailers such as Warehouse, they’ve really invested in their designs and customers are happy to pay for them. The same with Finery London and some of the European labels stocked by Asos – they all sell great design at great prices.”
She adds: “French Connection needs to step back and look at the product, even if that means taking it in a completely different direction.”
Sharma’s concerns are shared by Gatemore’s Meidar, who pointed to strong performances from fast fashion rivals in his letter to French Connection.
”Over the past eight years, comparable listed companies Ted Baker and SuperGroup achieved phenomenal sales growth and 16% and 18% EBITDA margins, respectively in the past year despite the onslaught of competition from the “fast fashion” sector including Zara, H&M and Topshop. Other high street retailers, such as Reiss, have also experienced tremendous growth during this period. French Connection, on the other hand, has underperformed.”
Meidar also argued French Connection maintains a too broad range of styles compared to other retailers operating in the same part of the market.
”By our recent count, French Connection’s range of dress options is more than 50% higher than that of Ted Baker, a company over twice the size in turnover,” he wrote.
”The same is true in respect of the range of dress options for Reiss, which is a business closer in size to that of FC. Note that this does not include the Company’s other brands – Great Plains, Toast and YMC – which together almost double FC’s range count. We found a similar situation in women’s knitwear and other categories. Maintaining such a broad range directly affects gross margins in that it increases the per unit costs of production (due to lower volumes per unit) and increases other costs such as design, sampling, logistics and inventory management. We believe that saving on these costs will dramatically improve margins.”
Michael Shalders, founder of fashion agent and distributor Love Brands, agrees that French Connection is being squeezed by an increasingly competitive high street and adds that it has fallen out of favour with independent retailers: “French Connection lost a lot of independent accounts when it introduced minimum account orders of £5,000. That’s only fine when you’re Ted Baker or Superdry and you’re at the crest of a wave, one of those brands an independent will build their whole business on. It’s also probably suffered from the European brands coming in the UK market.
“However, it needs to be said that French Connection still has a super brand image.”
French Connection will be hoping its performance can be bolstered by two high-profile appointments. Former Next group product director Christos Angelides and Asos’s Lee Williams both joined the company earlier this year.
Sharma argues that two fresh pairs of eyes will be good news for the business: “It’s always good to bring in senior management from successful companies like Asos and Next. It’s important that the new people work closely with the existing management team to address the real problems and look at new directions for the business.”
Drapers has contacted French Connection for a comment.