Shares in French Connection dived as much as 16% on Tuesday after the fashion retailer warned that trading remained “challenging” on the high street.
The company said it had reduced losses to £0.8m in the six months to the end of January from £4.4m in the same period a year before, which was broadly in line with expectations. But underlying sales in the UK, which strip out the impact of new store openings, slid by 3%, affected by unexpectedly mild weather in September and October, while low stocks and total sales fell 5.8% to £178.5m.
The shares clawed back some losses to close down just under 11% at 54.38p.
Stephen Marks, chairman of French Connection, said: “Although we are encouraged by forward orders in our wholesale business, trading on the high street remains challenging and we are planning accordingly.”
Marks said that despite difficult trading conditions the business had made another step towards profitability, but analysts said the retail veteran’s language was more subdued than in his previous trading statement in November 2014.
“French Connection is making progress but it is slow, perhaps disappointingly so,” said Anusha Couttigane, senior consultant at analysis firm Conlumino. “French Connection has struggled for a number of years to maintain the fashion credentials it established in the 90s.”
French Connection’s continued difficulties come as, despite tentative signs of recovery in Britain’s economy, consumers are feeling the pinch of wages having failed to keep pace with inflation. Clothing retailers endured a particularly tough end to last year as milder-than-expected weather discouraged shoppers from buying winter clothes.
“If we look at the industry data that is coming out, you don’t think that there’s a surge in consumer demand going on,” operations director Neil Williams told Reuters. “It’s certainly not on the fashion high street.”
French Connection said wholesale revenue, which comes from its sales to retailers in 60 countries around the world, rose 4.6% to £75.2m. The wholesale segment accounts for about 40% of total sales.
“We suspect that the new year has got off to a tough start in the UK,” said independent retail analyst Nick Bubb.
