Fading fashion brand French Connection's (FCCN) disappointing interims trigger a sharp 7.2% share price fall to 40.5p.
Revealing that the Camden-based retailer remains mired in the red with a dwindling cash pile to boot, today's numbers heap further pressure on Stephen Marks, who founded the company back in 1969.
Click here to unpack half-time figures to July from French Connection, where the dogged Marks still holds sway with a 41.7% stake. These reveal a loss before tax of £7.9 million, flat year-on-year with an improved retail performance offset by tougher trading in wholesale and licensing; there's also a reduction in closing net cash to £7.7 million (2015: £15 million) to report.
Lower sales of £69.2 million (2015: £75.8 million) reflect ongoing store closures as well as tough conditions on the high street. Encouragingly, French Connection flags 6.5% like-for-like sales growth in the UK/Europe, boosted by strong sales of its Spring 16 collection. Yet it must be noted this same-store peformance was only delivered against the softest of comparatives, like-for-likes down 10.7% in the comparable period.
French Connection, which also owns the Toast and Great Plains brands, faces an uncertain turnaround, particularly given additional pressures from ongoing rent and rates rises and the impact of living wage increases.
Following the huge initial success of its FCUK logo, which helped drive the share price north of £5 in 2004, French Connection has fallen out of fashion, succumbing to competition from an array of rivals including ASOS (ASC:AIM), Zara, Ted Baker (TED) and SuperGroup (SGP). Activist investors are unhappy with Marks' dual role as both chairman and CEO and are pushing for change to revitalise the retailer's poor performance.
However, the main man remains upbeat about French Connection's recovery potential. 'Although the overall performance for the first half has been disappointing, the retail result has been particularly pleasing when compared to last year in what has been a difficult retail environment,' insists Marks, adding 'performance in wholesale and licensing has been more challenging but we have started to see an improvement recently and expect to see a recovery in the second half.'
Marks believes 'the strong response in retail from customers to the Spring 16 collection, the positive initial reaction to Winter 16, coupled with an anticipated return to growth in the wholesale business and continued tight control of costs are positive signs for the continued recovery of the business in the second half of the year and beyond.'
Cantor Fitzgerald Europe's Freddie George, reiterating his 'hold' recommendation and 45p target price, sounds a less optimistic note: 'Our concern is that shareholder value continues to erode, the current restructuring programme is taking the business toward profitability at too slower pace while the cash balance, which offers some support to the share price, further declines.'
He adds: 'Activist shareholders are trying to shake the business out of its present malaise but until there is some buy-in from the main shareholder and brand inspiration, Stephen Marks there is unlikely to be any change in direction on strategy.'