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French Connection to sell Nicole Farhi and scale back US retail

French Connection is selling its loss-making designer label Nicole Farhi and closing most of its eponymous US shops following a strategic review.

The changes, which follow an earlier decision to quit the Japanese market, will create “a more focused business which is expected to be profitable and cash-generative”, the retailer said.

French Connection is disposing of Nicole Farhi for about £5m to private equity firm OpenGate Capital. The sale ends an almost 30-year association between the retailer and the Nicole Farhi brand, founded by French Connection chairman Stephen Marks and his former partner Nicole Farhi in 1982.

French Connection is to cut its number of US shops from 23 to six. The closure programme will cost about £6.5m. French Connection will continue to wholesale into the US.

French Connection chairman and chief executive Stephen Marks said: “The strategic review is now complete. We have had to make some tough decisions but our exit from the Japanese market, the reduction of our US presence and the sale of Nicole Farhi, together with a reduction in our overhead base, leaves us with a continuing business that we expect both will be profitable and cash generative even in the current difficult economic environment.

French Connection also issued its full-year results today. Operating profit from the businesses to be retained was £1.3m compared to a loss of £700,000 the previous year. Sales rose 1% to £200.3m.

The reported loss after tax was £24.9m compared to £16.4m the previous year.

Like-for-like sales at the French Connection UK and and European retail business were up 2.8% over the year.

Marks added: “Although this financial year has been difficult in our UK wholesale business, forward orders are showing an increase for the winter 2010 season for the first time in some years.”

Over the year French Connection saw “strong growth” from French Connection womenswear at both wholesale and retail while menswear continued to “under perform.”

“It is sad to see the Nicole Farhi brand leaving the group”, he said. “But I am delighted that its new owners are totally committed to nurturing the brand so that its full potential is realised.”

He added: “I am confident that the changes we have made will create a solid base for the development of the business and will enable the group to return to profitability in the near future.”

French Connection launched a new advertising campaign this spring to boost menswear sales and redefine the brand’s identity and boost its credibility.

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