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French Connection blames ‘difficult’ conditions for sales fall

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French Connection

French Connection has reported a sharp drop in retail sales, amid what it called “difficult trading conditions”.

Like-for-like retail sales fell 7% in the six months to 31 July, with pre-tax losses swelling to £15.1m from a deficit of £5.9m last year.

French Connection is closing shops but has had to take a £6.5m charge on some “onerous” leases it cannot leave.

New data from the Office for National Statistics showed that clothing sales fell by 1.9% between July and August.

The ONS clothing sales had declined “following a strong July, as suggested by clothing retailers”.

Overall retail sales were better than expected, rising by 0.3% compared to a forecast fall of 0.2%.

‘Weak trading’

Commenting on trading at French Connection, Stephen Marks, the company’s founder, chairman, chief executive and the largest shareholder, said: “The period as a whole saw weak trading, with the early and later parts affected by unseasonal weather and trading conditions overall being difficult throughout.”

The slump in like-for-like retail sales for the six months to 31 July has accelerated when compared to French Connection’s first half of last year when they fell by 4.1%.

Total sales for the six months fell by 2.4% to £58.1m.

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Clothing sales have slowed between July and August

The company has been closing stores and is shutting eight stores over the course of this financial year.

However, it warned it was unable to off-load other loss-making shops because of existing contracts it is unable to exit.

As a result, French Connection has taken a £6.5m hit for onerous lease costs in the six months.

It also said it had taken a £800,000 bad debt provision following the collapse of House of Fraser where French Connection had concessions.

House of Fraser was rescued by Sports Direct-owner Mike Ashley in August. Sports Direct is the second largest shareholder in French Connection with a 26.1% stake.

Cautious spending

Commenting on the wider retail sales figures, Ian Gilmartin, from Barclays Corporate Banking, said: “Clothing dipped in August as most shoppers had already finalised their summer wardrobe and the continued good weather resulted in little appetite for early autumn lines.

“With cooler temperatures on the way, fashion retailers will be hoping that they can achieve a better result in the next few weeks.”

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Overall, retail sales rose by 3.3% in the year to August according to the ONS, powered by strong demand for household goods such furniture and lighting.

However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The subdued level of housing market activity suggests that sales in this sector will fall back in September.”

The chief executive of Retail Economics, Richard Lim, said: “We remain cautious for the rest of the year.

“Yesterday’s surprise rise in inflation means real earnings remain under pressure. Against a backdrop of heightened political and Brexit uncertainly, many households will be more cautious with their spending.”

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