French Connection walks away from sale plan, says market remains weak

By

Sandra Halliday

Published
Jan 31, 2020

French Connection issued a surprise (and very short) update on Friday detailing the results of its strategic review, and its share price plunged as a result. Just to recap, the company has been looking at its operations since October 2018 and it has been up for sale during this time.

And the outcome of the review? Well, it’s not for sale any more. The troubled fashion retailer said: “After completing the review, the company has concluded that it will now focus on completing its turnaround and build on the progress made in recent years”.

Only a few months ago it had said it expected a sale by the end of last year and it’s clear that long-suffering investors in the firm weren’t happy at the latest development. The company’s shares fell over 20% in early trading on Friday.

The company didn’t say whether it had failed to find a buyer at the price it wanted or whether it had decided that it had a better chance of turning itself around in its current form.

So what happens now? The firm said its next steps will include “further right-sizing the store portfolio while renegotiating the cost base of the ongoing stores; close collaboration with the key wholesale customers to continue growing the business particularly in the US; increased investment in the online platform to enhance the customer experience and improve conversion, coupled with additional spend on marketing to drive traffic; development of the range of license arrangements to seek to increase the product categories available while expanding the current businesses; and pursuit of other areas of potential cost savings”.

The company will report its preliminary results for the year ending January 31 2020 on March 10. But it gave an inkling on Friday of what those results might contain when it made it clear that times remain tough.

“Reflecting the continued challenging trading conditions on the UK High Street, the board currently expects the result to be a loss before taxation of between £1m and £2m,” it said. “UK trading in both the Retail and Wholesale businesses has been more difficult during the second half of the year, especially during the fourth quarter”.

But French Connection is continuing to expand in the UK, despite having closed a number of stores in recent years. Only this week it opened a new 1,260 sq ft store in the Town Mall at The Peacocks shopping centre shopping centre in Woking.