French Connection in talks with potential funders
French Connection is in talks with potential funders to shore up its cash position to help it ride out the COVID-19 crisis. Without additional funds, it has warned it could run out of cash in the coming months.
The mid-market chain said that it had attempted to access Government support schemes to secure extra cash but had been unsuccessful due to tight qualification constraints, therefore it was proceeding down alternative routes.
In a trading statement the company said it was "confident" of securing the necessary funds to support its operations.
"We have attempted to participate in as many of the Government's support initiatives as is possible. The Job Retention Scheme for colleagues and rates relief for the store portfolio are now in place. It has however proved very challenging for us, in line with other retailers, to access any other Government funds due to the tight qualification constraints that have been imposed and to date we have been unable to access any further funding from these schemes.
"In the light of the Company's current cash position and the continued expected weak trading environment, we have been in active discussions with a number of potential funding partners. The Board is confident of raising sufficient funds to support the business until the return of trading levels that are able to support the ongoing operations.
"This process is proceeding well and we are making good progress on due diligence and agreeing terms. Without securing additional funding and should the current Covid impacted trading levels continue, the Company's cash resources will eventually be eroded in the coming months," a statement said.
The company said it had taken further measures to conserve cash, including extended payment terms and securing discounts with suppliers, agreeing rent holidays or deferred payments with landlords, reducing forward orders with factories and rescheduling payments with HMRC.
It has said that it is working towards the safe re-opening of its store portfolio, which is expected to happen in a phased manner from 1 June, should the Government give the go-ahead. On a more positive note the company has been able to continue to trade online during the crisis with e-commerce in the UK and US sales up 44% in the past six weeks.
In addition its wholesale partners have been able to continue to trade online though this makes up a small amount of its business, but it had seen sales begin to rise in Europe where non-essential retail is beginning to open up.
Last week it was revealed that French Connection had received an offer for the business in December last year from former All Saints CEO Stephen Craig, who had the backing of two private equity houses. However the offer, which represented an 18% premium on its share price at the time, was declined and not presented to shareholders.