LONDON — After weathering a particularly hard winter, French Connection Group plc is reevaluating its British retail operations and could shutter unprofitable stores.
Chairman and chief executive officer Stephen Marks called the winter of 2011-12 “the most difficult I have seen in all the years I have been in business,” and said the company would be looking at “everything we do [at retail in the U.K.] and seeking to improve.”
French Connection said Wednesday the retail business in the U.K. and Europe generated a loss of 8.2 million pounds, or $12.9 million, in the 2011-12 fiscal year, compared with a loss of 1.6 million pounds, or $2.5 million, in the previous 12-month period.
All figures have been calculated at current exchange.
Marks said in a telephone interview that stores in greater London were not suffering as much as those outside London.
“Ireland in particular has been extremely difficult,” he said. He said that while trading in the first six weeks of the new fiscal year has been “OK,” retail in England remains soft.
Some 14 store leases will expire over the next two years, and the company said that while landlords are prepared to negotiate lower rents in the current environment, “where this is not possible and stores are uneconomic, it is likely that we will reduce the size of the portfolio.”
French Connection is just one of a raft of British and international high street retailers that are suffering from cold weather that arrived too late in the season, the sluggish British economy, a slowdown in spending as U.K. consumers use spare cash to pay off debts, and increased raw material, energy, and transport costs.
French Connection also chose to swallow increases in raw material and production costs rather than pass them on to the customer, and that decision helped to push the group’s gross margin down to 48.1 percent.
For the 12 months, the company reported a 5.1 percent rise in revenue to 215.4 million pounds, or $338.2 million, thanks to a 17 percent increase in wholesale volumes in the U.K., Europe and North America.
Net profit for the year tumbled 25.3 percent to 5.3 million pounds, or $8.3 million.
Marks said he’s confident about the performance of the business internationally, and said that 12 more shops were planned for China and 15 for India, both through retail joint ventures in those markets.
The company also said the launch of the UK Style by French Connection range of clothing had done well in its first year and contributed to a 2 million pound, or $3.14 million, bounce in licensing income in North America. The collection is produced under license with Li & Fung and sold at Sears.
Back in the U.K., French Connection has recently launched a premium 15-piece occasionwear collection of clothing with prices that range from 150 pounds, or $236, to 400 pounds, or $628.
The brand also plans to launch a homeware collection that will be exclusive, like the new clothing line, to the U.K. and Europe.