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21 Nov 2012 07:00
FRENCH CONNECTION GROUP PLC
Interim Management Statement
21 November 2012
French Connection Group PLC is announcing its Interim Management Statement for the 16 week period from 1 August to 20 November 2012.
Performance of our UK/Europe retail business has improved during the period, although the market remains inconsistent. On a like-for-like basis, revenue during the third quarter was flat on last year compared to the disappointing decline of 9.5% in the first half of the year. Revenue has reflected the more autumnal weather in comparison to last year and sales of coats and knitwear have been much improved. Gross margin levels were similar to last year.
In line with the half-year results announced in September, UK/Europe wholesale revenues have continued to be below last year as a result of lower forward orders and reduced in-season business.
In North America, retail trading in the quarter has been broadly flat on last year in both revenue and gross margin levels. Wholesale revenue has continued its growth and the overall trading result for the North America region continues to run ahead of last year.
As previously reported our joint ventures in Asia are reflecting the retail market slow-down in China and Hong Kong, resulting in a small reduction in profit levels in the period.
Group profit before tax for the third quarter was broadly in-line with our internal expectations but as ever the overall outcome for the year is dependent on the retail selling season over Christmas and New Year.
The Group continues to operate with a strong balance sheet and no debt. Net Group cash at the end of October, a cyclical low-point during the year, was £10.6 million.
The implementation of the initiatives arising from our review of the UK/Europe retail business outlined in our announcement on 19 September is progressing well. The test of operational changes in stores has demonstrated that successful application improves retail sales volumes. As a consequence these are being implemented across the portfolio, targeting key stores first. Changes to the way we develop our product ranges have been implemented and this, together with the changes to the design team, has had a positive impact on the Autumn 2013 ranges. We have actively managed a reduction in our inventory and have achieved a £5 million year-on-year reduction in stock at the end of October 2012. As anticipated, progress on divesting our under-performing stores has been slow as demand for retail space remains weak.
We remain confident that the initiatives being implemented and tight cost management will result in a steady and significant improvement in the revenue and gross margins in the business and will therefore have a positive impact on Group profitability across the next two financial years.
Other than as detailed above in this Interim statement, there have been no material events or transactions in the period from 1 August to 20 November 2012.
Enquiries:
Roy Naismith/Neil Williams French Connection +44(0)20 7036 7063
Kim Fletcher/Natalia Dyett Brunswick +44(0)20 7404 5959
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