"The results are rather disappointing," said French Connection's (FCCN) finance director Roy Naismith, as the retailer reported an underlying loss before tax of £7.2m, compared to a £4.6m profit in the previous year.
Declines in sales volumes in both the retail and wholesale businesses in the UK and Europe offset gains elsewhere. Here, retail operating losses more than doubled to £16m, as like-for-like sales fell 7.4 per cent, which meant the entire UK/Europe division plunged into a £9.6m loss, from a £1.8m profit in 2011-12. Falling revenue resulted in higher levels of discounting, squeezing retail margins from 56.2 per cent to 54.8 per cent. Scrapping stores also proved expensive, costing £1.1m compared to generating net income of £0.7m in the previous year. Mr Naismith points out that it's difficult and costly to find buyers for leases in the UK's struggling high streets.
North America offered some positive news. Wholesale operating profits grew 37 per cent to £7.8m on revenues up 19 per cent to £29m. However, retail revenue in the region fell 10 per cent to £20m, as same store sales declined 4.1 per cent which led to a doubling of losses to £1.6m, offsetting gains in wholesale.
Broker Numis expects pre-tax losses of £5.5m and £1.8m for the next two financial years, giving loss per share of 6p and 2.7p, respectively.
| FRENCH CONNECTION (FCCN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 28p | MARKET VALUE: | £27m | |
| TOUCH: | 27-28p | 12-MONTH HIGH: | 56p | LOW: 19p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 65p | NET CASH: | £28.5m | |
| Year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 214 | -11.8 | -11.5 | 5.0 |
| 2010 | 213 | -9.0 | -9.6 | 0.5 |
| 2011 | 205 | 7.3 | 9.2 | 1.5 |
| 2012 | 215 | 5.0 | 4.7 | 1.6 |
| 2013 | 197 | -10.5 | -10.7 | nil |
| % change | -8 | - | - | -100 |
