French Connection receives £15m in funding from Hilco

French Connection has received £15m in funding from retail investors and turnaround experts Hilco to shore up its cash position in the post lockdown era.

The working capital facility extends over the next two years and the company said it would be sufficient to cover its cash requirements based on current expectations of trading.

Since stores were permitted to reopen in England on 15 June footfall has been significantly down, French Connection said, but conversion of customers who had come into stores had improved.

In a trading update released this morning the company said: "We are seeing sales volumes grow week on week, as further relaxation of the lockdown continues, however we anticipate this to be a gradual process especially in larger cities.

"Whilst ensuring strict compliance with physical distancing and hygiene guidelines by our staff, we have continued to operate our own websites in both the UK and USA, with sales up 24% over the last 15 weeks."

The company added that it had also experienced improved wholesale sales post lockdown as its wholesale partners began to open their stores across the UK and Europe.

It said it had taken a number of steps to reduce its costs since the crisis began, such as reducing inventory for AW20. However deferred payments to HMRC, landlords and suppliers were now falling due so additional funding was required to ensure it had sufficient cash to cover those commitments.

In a previous statement the company said it had not been able to participate in Government-backed support schemes due to the qualifying criteria hence the need to strike the deal with Hilco.

"The Company will continue to tightly manage its cost base over the coming months and we await better visibility on the speed of the recovery of demand across its different business channels and territories.

"Although the stores have reopened, with appropriate increased hygiene and social distancing measures in place to keep colleagues and customers safe, it is too early to predict how quickly and to what extent store footfall and therefore sales will recover.  This will also impact the rate of improvement within the wholesale channel," it said.

Given the uncertain outlook French Connection declined to give a profit forecast.