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French Connection issues profit warning after sales slip

French Connection has issued another profit warning after sales at the retailer dropped 9.5%.

Sales at French Connection dropped 9.5% in the 15 weeks to May 17, with the company saying that it was “heavily impacted by disappointing sales volumes” in its UK/Europe division.

Sales in its UK/Europe retail division dropped 10% compared to the same period last year, and 12% down on a like-for-like basis. The company said stronger demand for discounted product during the winter Sale resulted in a lower gross margin.

In an interim management statement French Connection said: “The UK retail market remains particularly challenging and the combination of prevailing consumer caution and ongoing economic difficulties suggests that this will not improve in the second half of the year.”

The retailer added it remains cautious about the outlook for the rest of the financial year and as a result it “appears unlikely that [its] profit performance for the full year will meet current market expectations”. 

This is the second profit warning to come from the retailer this year. In February it issued a profit warning, downgrading its pre-tax profit from £5m for the year to January 31 to £4.7m.

Sales across the UK/Europe wholesale division dropped year on year as in-season repeat orders slowed, although French Connection said it continued to perform in line with the company’s expectations. For autumn 12 the retailer said forward orders are “slightly below” this time last year.

During the period French Connection launched two new ranges, the Premium Collection and French Connection Home, both of which it said have been well received.

Profits for its North American arm continued to improve with an 11% increase in revenue in the region during the period. French Connection’s ecommerce channel also saw good growth during the period.

Drapers reported in March the retailer had begun a review of its retail operations and appointed external advisors to support management in this process. In the statement the company said it is continuing to work hard to manage its retail store portfolio including lease re-negotiations.

Readers' comments (1)

  • Hopefully now they will rethink their terrible advertising.

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