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French Connection says like-for-like sales in the UK and mainland Europe fell 7% in the six months to the end of July. Photograph: Hannah Mckay/Reuters
French Connection says like-for-like sales in the UK and mainland Europe fell 7% in the six months to the end of July. Photograph: Hannah Mckay/Reuters

French Connection to shut more stores as House of Fraser collapse hits results

This article is more than 5 years old

Struggling fashion chain loses just over £15m in the first half of the year

French Connection has blamed tough conditions on the high street and the demise of House of Fraser as it reported a big increase in half-year losses and plans to shut a further eight stores.

The struggling fashion chain said like-for-like sales in the UK and mainland Europe had fallen 7% in the six months to the end of July. It lost just over £15m in the period, compared with £5.9m a year earlier.

The loss reflected nearly £10m of provisions for bad debts partly related to the collapse of House of Fraser, where French Connection has concessions. The retailer also made a one-off provision for “onerous leases” at a number of loss-making stores that it wants to shut but is unable to at the moment.

“We see this downturn as a structural event,” the retailer said. It pointed to the number of high street closures and CVA agreements in the retail and leisure business in recent months. A CVA is a form of insolvency, which must be approved by creditors, which many retailers and restaurant groups have employed this year to cut their store rent payments to landlords.

The John Lewis Partnership, a stalwart of the high street, saw its half-year profits almost wiped out last week, hit by heavy discounting by rivals struggling for survival.

French Connection became known for its notorious FCUK T-shirt slogan in the 1990s but has struggled to compete with rivals such as Next and Zara in recent years. It said sales in the first half were also hurt by extreme weather conditions – the UK was hit by the “beast from the east” cold snap in February and March, and had its joint hottest summer on record.

When a £9.3m profit on the sale of fashion brand Toast is included, French Connection lost £5.5m in the first half. With strong order books for the second half, the firm said it was still on track for a small profit for the year as a whole, after six years of losses. Its wholesale business reported 6.2% sales growth in the first half.

Faced with the decline of the British high street, French Connection has been shifting its business towards wholesale, supplying department stores in the US such as Bloomingdales and Nordstrom, as well as the online arms of UK and European retailers. It started closing shops five years ago and aims to have only 30 stores in the UK and Europe by the end of January, compared with 65 in 2013. It is shutting eight stores this year, six of them in the UK.

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Stephen Marks, the chairman and chief executive who founded French Connection in London in 1972, said: “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.”

The company’s shares fell more than 6% on the results.

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