By  on March 10, 2005

LONDON — A tough U.K. retail environment and a flawed fashion offering dragged down profits at French Connection in the fiscal year ended Jan. 31.

The firm said net profits fell 15.5 percent to $42.8 million, or 22.3 million pounds, from $50.6 million, or 26.4 million pounds, due to a drop in retail sales in the U.K. and the U.S. and a subsequent increase in markdowns.

In November, French Connection issued a profit warning.

Sales fell 0.82 percent to $510 million, or 265.7 million pounds, from $514.4 million, or 267.9 million pounds. The company admitted it had relied too heavily on previously successful styles and did not focus enough on fashion-led products.

“We got a few things wrong, and we were a bit boring,” said Stephen Marks, French Connection’s chairman and chief executive officer, in a telephone interview. “We relied on our past successes and didn’t offer enough newness. But overall, the message is positive. We’re moving ahead, and looking forward to a good year.”

Marks said French Connection offered up too many of its basic knits, which competitors have subsequently knocked off at a lower price. He added the company also “overdid” the fcuk logo T-shirt, and has since updated its T-shirts, minus the notorious logo.

In the U.K. and Europe, retail sales fell 5.2 percent to $212.4 million, or 110.6 million pounds, from $224 million, or 116.7 million pounds. In the U.S., retail sales were flat at $63.7 million, or 33.2 million pounds, and the company admitted there were larger-than-planned markdowns in the period.

In the U.K., wholesale sales rose 1.2 percent to $194.5 million, or 101.3 million pounds, from $192.2 million, or 100.1 million pounds. In North America, wholesale sales rose 0.78 percent to $24.7 million, or 12.8 million pounds, from $24.4 million, or 12.7 million pounds. The statement said that growth was due to business with the major department stores.

“Overall, America is in good shape; it’s the competition here that’s much more fierce,” Marks said. 

On the upside, license income rose 25 percent to $8.64 million, or 4.5 million pounds, from $6.9 million, or 3.6 million pounds, thanks to the expansion of the fcuk fragrance worldwide and the launch of new toiletries products with Boots, the British drugstore chain.Although sales in the first few weeks of the current fiscal year declined by 17 percent on a like-for-like basis, the company said some of its latest fashion offerings are getting a good response. “Sales of embroidered skirts and tops are doing well; jeans are flying out of the stores,” said Marks.

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