The bitter French Connection row has escalated further after one of the company’s biggest shareholders issued an ultimatum to its founder Stephen Marks.

Gatemore Capital, which owns around 8% of the retailer and brand, has told chief executive, chairman and major shareholder Marks to step down from one of his roles, or sell his stake.

Tensions between Marks, who retains a 42% stake in the business, and investors have escalated following five consecutive years of losses at the fashion business.

Schroders offloaded its stake in French Connection earlier this year, allowing Sports Direct tycoon Mike Ashley to snap up an 11% stake.

The Daily Mail reports that the battle between Marks and shareholders could result in Ashley increasing his grip on the embattled business, should other smaller investors opt to sell up.

Widening losses

French Connection has fallen out of fashion since its FCUK-emblazoned products caught the imagination of teenagers.

Its losses widened from £3.5m to £5.3m last year.

Relations between Marks and investors had already been strained ahead of last week’s AGM.

More than half of independent shareholders, who voted via proxy, rebelled against the reappointment of both Marks and non-executive director Dean Murray.

However, both were re-elected by a show of hands.

‘Something needs to be done’

Gatemore chief investment officer Liad Meidar said: “There are people out there who feel they have a God-given right to be on a board and are welcome to run the business as they see fit … ”

“Something needs to be done about it. We are doing that something.”

Meider insisted French Connection’s retail and wholesale divisions should be split into two businesses. He said a failure to do that could spark smaller shareholders to join forces and demand action.

Marks founded French Connection in 1972 and retains a 42% stake in the company.

French Connection said in a statement: “We are well aware of the views of a small group of shareholders.

“We are delivering a turnaround plan which is designed to streamline the business and return it to profitability. Management’s focus is on achieving this.”