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French Connection in Loss

Sales rise 5 percent for French Connection.

LONDON — French Connection Group plc reported a net loss of 16.4 million pounds, or $29.6 million, in the 12 months ended Jan. 31, compared with net profits of 1.6 million pounds, or $2.8 million, a year earlier.

This story first appeared in the March 20, 2009 issue of WWD.  Subscribe Today.

Sales rose 5 percent during the year, to 248 million pounds, or $448 million, from 236.1 million pounds, or $427 million. Dollar figures have been calculated at average exchange rates for the periods to which they refer.

The loss was driven partly by a 12 percent rise in operating expenses to 140.1 million pounds, or $253 million, after the company acquired its Japanese business last year and increased its retail space in the U.K. by taking on previously franchised stores.

French Connection also incurred a one-off, noncash charge of 11.9 million pounds, or $21.5 million, for impairment of goodwill, which originally arose when French Connection acquired its U.S. joint venture in 2001 and again when it acquired its franchise stores in the U.K. The company said the impairment charge took into account the decline in the U.S. retail market and “poor market conditions.”

“The results for the year are disappointing and, to a large extent, are a reflection of the impact on fashion markets of the downturn in the major world economies and in particular the U.S. market,” stated Stephen Marks, chairman of French Connection. “We are preparing for another difficult year.”