British fashion chain French Connection Group Plc said on Wednesday its struggling clothes business was on the road to recovery after it eked out a small profit last year.
French Connection, striving to remake itself as a stylish label after its once-controversial FCUK brand lost favour on the high street, said a second-half upturn pushed it into the black last year and it was upbeat about its 2007 prospects.
“The financial results for the last year are very disappointing,” Chairman Stephen Marks said. “However, we believe that there is good evidence to indicate that we are at the start of a new phase.”
Profit before tax met market expectations at 4.0 million pounds ($7.72 million) for the year to Jan. 31. But it was well below the 12.2 million pound profit in its 2005/06 financial year and only a fraction of the 33.7 million of 2004/05.
The company’s shares dropped 2.6% to 217 pence after the results, valuing the company at about 208 million pounds.
Analysts were cheered by French Connection’s enthusiasm but the jury remained out on its recovery.
“We would remain cautious as we believe the company still has its work cut out in re-establishing its credibility with its customer base,” analysts at Numis Securities said.
French Connection signalled a strong start to this year in the retail market, saying it was on track for a five percent increase in like-for-like sales in Europe and North America.
Its wholesale business, which accounts for more than one quarter of revenue, was less buoyant with the order book slightly down, Chief Operating Officer Neil Williams said.
He said he believed overall performance was “in line” with market forecasts of 7.5 million pounds in 2007/08 profits.
French Connection, propelled to British fashion stardom by its FCUK label launch in 1997, has been waging a two-year battle to win back customers.
It has played down the use of slogans like “FCUK fashion”, though has not completely abandoned its roots.
“We’re still using the FCUK but in a much more subtle way than we have used it in the past,” said Williams.
The retailer has also won plaudits from the fashion press for new clothes ranges and again sparked controversy with a 2006 television ad that showed two female models kissing then head-butting each other.
Williams dismissed speculation that Stephen Marks, founder and chairman of French Connection, might sell his 42% stake, a possibility reported last year. He said Marks’ focus is on lifting the company’s profitability.
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