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Analysis: What does the Sports Direct deal mean for French Connection?

Sports Direct has upped its efforts to become the “Selfridges of sports retail” by snapping up a stake in French Connection. But what does this mean for the upmarket high street brand and retailer?

Last week, Mike Ashley added to his growing portfolio of shares in fashion brands and retailers by acquiring an 11% stake in French Connection. The acquisition is in line with Sports Direct founder Ashley’s pledge to move away from a “pile it high, sell it cheap” model in favour of a more elevated, premium positioning.

However, what it means for French Connection is still up for debate.

Sports Direct-owned premium retailer Flannels already stocks French Connection menswear online. Charlotte Pearce, analyst at GlobalData Retail, says the brand is likely to become much more prevalent in Flannels stores across the UK, including the new unit earmarked for London’s Oxford Street.

One industry insider suggests Ashley may look to stock French Connection product – particularly items carrying its “FCUK” logo – in some Sports Direct stores.

“Mike has pots of cash and French Connection seems vulnerable,” the source says. “Maybe he sees a chink of light and is buying it to sell French Connection through Sports Direct like he has done before with Firetrap, Donnay and Karrimor.”

He adds: “Stephen [Marks, the founder, chief executive and chairman] isn’t getting any younger and with retail being as tough as it is for brands like French Connection, which haven’t managed to reinvent themselves or carve out a niche between designer and high street, it makes sense to look for outside investment.”

The owner of a brand agency agreed that French Connection’s poor performance over the last number of years had left it exposed to an outside bidder.

“Mike Ashley can sniff out a deal and French Connection is like a wounded animal. The biggest concern would be if Ashley takes it for Sports Direct, as it would lose all its appeal to the wholesale market and its value as a high street brand.”

Unrest is rife at French Connection. Shareholders Gatemore, OTK Holding and Zoar Invest are baying for blood in the form of non-executive directors Dean Murray and Claire Kent, whom they blame for the “tremendous decline” in value of the company. French Connection is welcoming the Sports Direct move, calling the investment “a vote of confidence” in the firm.

However, this may be a case of putting on a brave face given Ashley’s track record with buying brands for Sports Direct’s exclusive use. If French Connection is to regain lost ground and move towards its former glory as a premium label, the team needs to ignore all the internal politics, and renew its focus on great design and premium-quality product.   

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