French Connection, the high street chain which is under increasing pressure from activist shareholders, suffered a “disappointing” first half of 2016. The business posted a pre-tax loss of £7.9m in the six months to 31 July (a flat figure year-on-year) on sales down from £75.8m to £69.2m.
The business reported that it had achieved a 6.5% uptick in like-for-like retail revenue (though overall sales were down 2.5%). A poor performance in wholesale was the major cause for woe with some accounts left reluctant to place orders given the brand’s problems.
Chairman and chief executive Stephen Marks has been attempting to reverse the fortunes of the group he founded in 1972 but this performance will do little to assuage activist shareholder Gatemore Capital Management, which has been calling for more convincing action such as the removal of some non-executive directors, a shift in focus to younger consumers and the dropping of the FCUK brand.
Gatemore has also called for Marks to split his joint chairman and chief executive position, which contravenes corporate governance. It is understood that Marks, who is famously protective of his business and is still the major shareholder in it, has refused to meet with Gatemore or cede to its demands.
“There is still much work to do in the rest of the year to move the business forward significantly,” he said. “We believe the team we have in place and momentum we are seeing will help us to achieve this.”
Marks is closing underperforming stores with five more due to close in the next year and has made significant appointments to the executive team including Next’s former product chief Christos Angelides and finance director Lee Williams who joined from ASOS.