Newspaper article The Evening Standard (London, England)

French Connection Feeling the Pinch as Profits Slump; CITY BRIEFING

Newspaper article The Evening Standard (London, England)

French Connection Feeling the Pinch as Profits Slump; CITY BRIEFING

Article excerpt

Byline: SARAH MARKS

HIGH Street chain French Connection's first-half profits slumped almost 70% as it was forced to slash prices and extend its summer sale to clear a backlog of unwanted stock.

Like-for-like sales fell by 9%.

Chairman Stephen Marks again blamed the tough retail environment for the group's lacklustre performance and ignored persistent criticism that the fashion ranges have missed the mark.

Profits during the first six months of the year were just [pounds sterling]5.1 million compared with [pounds sterling]16.2 million this time last year, as sales fell by 8% to [pounds sterling]117.9 million. Despite this, Marks said he was confident he would hit the bottom end of current City expectations, which were revised downward in July to between [pounds sterling]20 million and [pounds sterling]25 million.

This pleased the market, which pushed the shares up 17p to 262p.

Everything depends on how well the new clothing collections sell.

While there was no update on current trading, Marks reported "some encouraging signs of a positive response to the winter ranges".

Asked if like-for-like sales in the second half would move into positive territory, Marks said: "We believe so."

But some analysts were distinctly underwhelmed.

Iain McDonald of Numis remarked that French Connection's habitual optimism was often undermined by hard facts.

He said: "Last week we downgraded our forecasts and we are happy to leave them where they are: 2006 profits before tax of [pounds sterling]16.9 million." He doubts French Connection can make the [pounds sterling]14.9 million in the second half of the year they need to hit expectations given the current retail environment.

Order books for both winter 2005 and summer 2006 are 15% below last year's levels.

Speculation that Marks, will take the company private or sell it in the near future is supporting the share price. …

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