French Connection interim losses widen amid difficult trading

French Connection was under the cosh on Thursday as the fashion retailer said losses widened in the first half amid difficult trading in the UK.

In the six months to 31 July, losses before tax widened to £15.1m from £5.9m in the same period a year ago as revenue fell 2.4% to £58.1m. On an underlying basis, however, losses narrowed to £5.5m from £5.9m the year before as it benefited from store closures.

The company said continued growth in wholesale, where revenues were up 6.2% to £30.8m, was offset by a reduced store portfolio and tough retail trading in the UK. Retail revenues dropped 10.5% to £27.3m, with a like-for-like sales decline of 7% for the UK and Europe. Meanwhile, licensing income was flat at £2.6m.

The group said it was on track to return to profitability at the year end.

Chairman and chief executive Stephen Marks said: "I am pleased that the changes we have made around the business over the last couple of years continue to move us forward.

"There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although we can take great confidence from the performance of the wholesale business and the stability of the licence income.

"The order books we have provide a clear outlook for the second half of the year in wholesale although retail continues to be challenging. We remain on target to return the business to profitability this year and we will be doing everything we can to ensure that happens."

Numis left its forecasts for the company unchanged and said it continues to expect the business to achieve breakeven for FY19. "We remain confident in the growth prospects for the French Connection brand and retain our positive stance," it said.

"Accelerated by the Toast disposal, we note that French Connection’s business is increasingly weighted towards its wholesale operations (now nearly 60% of revenue), such that even a -7% H1 Retail LFL result has seen our FY profit before tax estimate unchanged."

French Connection sold its 75% stake in fashion brand Toast to Danish fashion company Bestseller back in April.

At 0920 BST, the shares were down 5.6% to 47.29p.