Shares in French Connection (FCCN) fell 15.4% to 4.78p on Tuesday after the embattled fashion brand warned it could run out of cash in months, without additional access to capital and should pandemic-driven disruption continue for much longer.
The news comes a matter of months after the Camden-headquartered retailer abandoned plans to sell the business following a protracted strategic review and in order to focus on what looked at the time like an unlikely turnaround.
CASH CRUNCH
In today’s update on trading and its financial position, struggling French Connection didn’t spell out its cash burn or precise trading levels. Yet it warned that ‘without securing additional funding and should the current Covid impacted trading levels continue, the company’s cash resources will eventually be eroded in the coming months.’
With its stores and concessions remaining closed, the finances of the loss-making retailer behind namesake brand French Connection, as well as Great Plains and You Must Create (YMC), have come under severe strain.
In its fight for survival French Connection, whose backers include Mike Ashley-controlled Frasers (FRAS), has attempted to participate in as many of the Government’s support initiatives as possible.
‘TIGHT QUALIFICATION CONSTRAINTS’
‘The Job Retention Scheme for colleagues and rates relief for the store portfolio are now in place,’ explained the beleaguered retailer and wholesaler, before it added. ‘It has however proved very challenging for us, in line with other retailers, to access any other Government funds due to the tight qualification constraints that have been imposed and to date we have been unable to access any further funding from these schemes.’
With its cash resources dwindling and given the weak retail trading backcloth, French Connection has been talking with ‘a number of potential funding partners’ and the board is ‘confident of raising sufficient funds to support the business until the return of trading levels that are able to support the ongoing operations.’
READ MORE ON FRENCH CONNECTION HERE
French Connection said it was talking to suppliers, landlords and factories in a bid to cut costs and is also talking to HMRC with a view to rescheduling payments.
The retailer does not expect to return to normal levels of trading for some time, although it is planning to open shuttered stores ‘in an orderly manner’ from June.
One positive, that demonstrates there is still some life in the brand, is that French Connection has been able to continue operating its own websites in both the UK and USA, with sales up 44% over the last 6 weeks.
French Connection has also continued to supply a few of the predominantly online wholesale customers still trading, although this makes up a small proportion of the overall business. In addition, French Connection is starting to see a small increase in activity in Europe as countries begin to open up.
