Beleaguered fashion retailer French Connection should do itself a favour and shut down its retail operations.
The struggling fashion retailer, which revealed full-year falling sales and shrinking losses yesterday, has suffered setback after setback in recent months with agitating shareholders and the loss of retail veteran Christos Angelides as a non-executive director.
Are stores a millstone?
French Connection has embarked on a store closure programme, though investors believe that it is at too slow a pace.
Already, it has cut its UK store numbers from 98 in 2010/11 to 67 last year. It aims to slash its estate once more and operate 30 stores by 2019.
Meanwhile, UK concessions have grown from 43 in 2010/11 to 53 last year.
“If French Connection’s management team were to start the business from scratch in today’s ultra-competitive market, replete with pioneering pureplays, how would they grow the business?”
It’s clear that in a few years, concessions will outstrip standalone stores. So why not go the whole hog and become a concession business, without the millstone of a store estate around its neck?
This is a company that is going to have to fight on all fronts to keep its head above the water – it should be cutting loose as much weight as possible.
If French Connection’s management team were to start the business from scratch in today’s ultra-competitive market, replete with pioneering pureplays, how would they grow the business?
It is unlikely that in addition to 50-plus concessions and a flourishing web presence, which generated 27% of retail sales in its last financial year, it would opt to open 30 standalone stores.
As Global Data (formerly Verdict) analyst Charlotte Pearce says: “With competition intensifying, it is a tall order for French Connection to become a go-to destination on the high street, so seeking out third-party distribution opportunities via department store concessions and online pureplays must be the prevailing strategy going forward.”
Its retail division generates the biggest slice of money for the retailer, bringing in 57% of revenue, although sales fell 4.9% over the year. So why should it be shut down?
Because it hasn’t made a profit in years. Since Retail Week Prospect’s records began in 2010/11, losses have risen and diminished but it has never been in the black.
Last year its losses were to the tune of £9.8m. This may be a significant improvement on 2016’s £15.6m, but French Connection’s earnings have headed in the right direction before and then reversed deeper into the red.
The top line has had a more straightforward journey, falling steadily since Retail Week Prospect’s records began in 2010/11. In that time they have nearly halved, going from £151.2m to £87.9m.
Meanwhile, wholesale, which brings in 43% of revenue, made £10m profit last year. This is a drop from £13.3m in 2016 but you have to wonder what this division might be capable of if it had the group’s full attention.
Overall, the group’s performance has been dragged down by an underperforming retail division, which French Connection seems unable to revive.
French Connection’s board needs to match its ambitions to its reality – and axing retail is the first big step in that journey.