The turnaround of fashion retailer and wholesaler French Connection (FCCN) is gathering momentum. Shares in the FCUK-brand owner strut 11.4% higher to 74.63p as a short but sweet trading statement details material sales improvement.
London-headquartered French Connection flags an impressive 11% improvement in like-for-like sales in its UK and Europe retail business over the 11 weeks to 12 April. This represents a continuation of a recent positive trend driven by self-help measures including product range improvements – French Connection has seen favourable receptions to its Spring and Winter 2014 collections - as well as gently rising consumer confidence.
Now admittedly, French Connection, which specialises in selling affordable fashion with a quirky spin on design, delivered this performance against some easy first half 'comps', as same-store sales were down 4.5% last year. Yet today's positive missive builds on encouraging annual numbers to January (12 Mar) which revealed losses pared to £4.4 million (2013: £7.2 million).
Though the important US market remained promotional, French Connection's second half like-for-like sales in the UK & Europe swung into positive territory with improved product collections, lower discounting and an increasingly confident shopper all contributing.
French Connection, founded in 1969 by Stephen Marks, the chairman and chief executive who still holds sway with a chunky 41.8% stake, has previous with profit warnings, supporters argue its turnaround is in with a fighting chance.
The brand resonates globally and with no debt and £28.2 million of year-end net cash, roughly 45% of its £64.25 million tag, French Connection has the financial clout to invest in strengthening competitive advantage and driving the turnaround.
The ongoing closure of loss-making stores is improving earnings quality, while international e-commerce and potential new licensing deals offer additional catalysts for financial improvement. Before today's bullish statement, house broker Numis Securities forecast year-to-January losses reducing to £1.6 million on an improved top line of £191.8 million (£189.4 million), ahead of a return to £300,000 profits from £196.3 million sales by 2016.