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26 Nov 2008 07:00
FRENCH CONNECTION GROUP PLC
Interim Management Statement
26 November 2008
French Connection Group PLC is announcing its Interim Management Statement covering the period from 1 August 2008 to 25 November 2008.
It has been widely reported that the retail environments in both the UK and North America have deteriorated markedly since the banking crisis hit the headlines in September. We too have seen the impact of this in our sales figures with the strong performance in UK retail sales in the first weeks of the new season replaced by softer results more recently. Overall Group turnover in the three months to 30 October 2008 is slightly below the level achieved last year.
In the first sixteen weeks of the second half of the financial year starting on 1 August 2008, sales in the UK/Europe retail division (accounting for 49% of Group turnover) grew by 3.7% in total and grew by 1.0% on a like-for-like basis. In French Connection ladies' wear and Toast we have seen strong growth. Our men's wear ranges have performed less well, continuing the trend seen in the first half. In recent weeks the sales performance across UK/Europe retail has become weaker and considerably more volatile.
As previously highlighted, revenue in our wholesale business in UK/Europe (accounting for 21% of Group turnover) is below the level seen last year reflecting the transfer of business from the wholesale division to the retail division and lower levels of in-season orders. Forward orders for Spring/Summer 2009 remain broadly flat on last year after taking account of the transfer of business to retail.
In our North America wholesale business (accounting for 8% of Group turnover), revenue in Dollar terms in the second half is now expected to be slightly below that achieved last year as our customers seek to delay delivery of new season product in anticipation of extended sales periods after Christmas. Further, the difficulties which our customers' are facing are likely to impact the level of orders placed for the new financial year.
Our balance sheet remains strong with £20.0 million of net cash at the end of October 2008 (2007: £26.4 million). The reduction in cash levels reflects £3.0 million of capital expenditure including five new stores world-wide and the impact of the trading results over the previous twelve months. The cyclicality in our business results in October being one of the low-points for cash in the year and we would expect to build cash reserves as normal through the Christmas period.
As with many retailers, the Christmas trading period is key to our results for the year and the significant downward trend in sales in recent weeks indicates that we should be cautious in our expectations, despite the good start to the period in UK/Europe retail.
Other than as detailed above in this Interim Management Statement, there have been no material events or transactions in the period from 1 August 2008 to 25 November 2008.
Enquiries:
Roy Naismith French Connection +44(0)20 7036 7206
Tom Buchanan/Deborah Spencer Brunswick +44(0)20 7404 5959
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