French Connection defies United Kingdom retail gloom by narrowing financial losses

Retailer French Connection has said it is `very close´ to returning to profit but continues to shut stores

Shares in French Connection, which operates 116 outlets in Europe and North America, rose as much as 18.7 percent to 40 pence in morning trading.

Like-for-like growth in the Retail segment was 0.8%, slower than the previous year's 4.4%.

The company reported a 0.8 percent increase in like-for-like sales at its stores in the United Kingdom and Europe, and said the retail market place in the United Kingdom continued to be "particularly challenging".

The company said its underlying operating loss for the year ended January 31 came in at 0.6 million pounds, compared with a loss of 3.7 million pounds in the prior year.

French Connection's pretax loss narrowed to GBP2.3 million from GBP5.3 million the year prior. Gross margins rose 1.3% year-on-year, reaching 32.2%. "In the interest of all shareholders, we entered a period of full due diligence and negotiation over a number of months", chairman and chief executive Stephen Marks said in his statement.

Group revenues, meanwhile, were up 0.5% to GBP154m from GBP153.2m.

But Mr Marks said he believed French Connection was well-placed to weather the continuing pressures.

The high street chain also pulled the shutters on 11 loss-making stores, while opening a new concept store in Manchester.

Marks said that the group was "very close" to achieveing its goal of profitability, as it continues to close stores in the United Kingdom and find success in wholesale.

The news comes amid a turbulent time for both the retail industry and French Connection.

He said that although it was clear that the retail market in which French Connection is operating in the United Kingdom is "unlikely to improve in the near future" he expects to see the benefits from "ongoing portfolio rationalisation" going forward.

Meanwhile, the firm also confirmed it had received an unsolicited approach from a third party in the United States about a potential offer for the group during the year. In addition, he says the reaction to its collections and strength of its wholesale orders both for the spring and winter seasons further underpins the performance going forward. It has already closed one store since January, and plans another five closures.

"This ultimately did not lead to an offer for the group".

"While the brand continues to make steps in the right direction through store rationalisation and online investment, regaining appeal and winning back lapsed customers will be a challenge given competition from the likes of Ted Baker and Asos".

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