LONDON — A draconian restructuring program involving store closures, disposals, and an overall tightening of operations has begun to pay off for French Connection Group plc.
Profits at the fashion brand, which began cleaning house in 2009, soared to 7.1 million pounds, or $11 million, from 500,000 pounds, or $775,000, in the fiscal year ended Jan. 31. The increase was due to more full-price sales, increased gross margin, and growth in income from licensing deals and joint venture operations in Asia.
All figures have been converted at average exchange rates for the 12-month period.
“We have a strong balance sheet with cash reserves, no borrowings and a lot of opportunities ahead,” said Stephen Marks, chairman and chief executive officer.
Revenue in the period rose 2.1 percent to 205 million pounds, or $317.8 million, from 200.8 million pounds, or $311.2 million, due to increases in the wholesale businesses worldwide. Marks said tighter stock levels contributed to better quality sales in the period.
Among the most vigorous markets, he added, were China, India and Australia. In the U.S., wholesale revenue increased by 10 percent, while retail revenue was at breakeven, which the company said was a “good step forward” compared with the previous year’s loss of 1.1 million pounds, or $1.7 million.
Marks said the company is mulling opening more stores to add to the current eight in the U.S.
UK Style by French Connection, the new clothing brand produced under license with Li & Fung and sold at Sears, launched earlier this month, and Marks said he has high hopes for the new label. “The publicity has been sensational: Jessie J sings the song in our TV ad, which recently ran during ‘Saturday Night Live,’ and the ad will be rolling out to 6,000 cinemas across the country. It’s still early days, but so far the reaction to the line has been good,” he said.
The collection is set to generate at least 1.5 million pounds, or $2.4 million, of licensing income in the 2011-12 fiscal year.
Wholesale sales in the U.K. and Europe rose 11 percent in the period, with increased levels of full-price sales, and the company said orders for spring had increased by 15 percent.
However, retail sales in the region declined 1.4 percent, and the retail business generated a loss of 1.6 million, or $2.3 million. Marks said he does not see a significant improvement in performance in the region, due to the challenging economic environment.
In the U.K. — where all the major high street chains have been suffering from higher raw material and manufacturing costs, a hike in value added tax, and increasingly pennywise consumers — Marks said sales have been “tough going. February was a lousy month, but we’ve seen a bit of an improvement in March, and I think there will be some good opportunities in the future.”