French Connection Group: fashion faux pas?

What’s happened

Clothing retailer, the French Connection Group is used to being in the news
for some of the most controversial marketing campaigns ever launched.

The ‘FCUK’ brand prompted complaints about its suggestiveness, but proved a
massive commercial success. Then last month £2m TV adverts featuring women
fighting and a lesbian kiss also attracted a lot of attention. The group has
succeeded at getting its name noticed, even if some question the image it has
tried to project.

The notoriety hasn’t produced an endless success story though, and the
company had to issue a severe profits warning in December, which cut 5% off the
share price. In its report on the profits warning, the Guardian Unlimited
website even described French Connection as the ‘once trendy’ retailer. Ouch!

Financial director Rob Naismith, who joined the company in 2001 from
Starbucks, has seen the company grow into an international brand with stores in
the US, Europe, the Middle East, Australia and the Far East, as well as 109
outlets in the UK. Between 1999 and 2004 the share price increased fourfold.

What’s next

But now perhaps Naismith faces his most difficult task. The FTSE250 company
is due to publish its annual results next week and investors and analysts will
be looking for signs that the company has turned a corner.

Last year majority owner Stephen Marks warned that profits would be closer to
£11m-14m revising an earlier figure of £20m-25m. First-half profits were down
69% at £5.1m. He said trading conditions were ‘very difficult’, but insisted a
turnaround was possible.

Reported interest from Icelandic investors Baugur, which currently owns 13%
to 14% of shares, in either a takeover or helping Marks take the company private
has boosted the share price previously. But Marks, who owns a 42% share, has
cooled this speculation by saying he wants to keep the company public.

However, analysts have suggested the company is currently overvalued, so the
pressure is on Naismith and the other company directors to show French
Connection’s fortunes have bottomed out.

Next Tuesday, when the results are published, will be one of the most
important days in the company’s history. It is essential the seeds of recovery
are evident, or the future could be bleak for Naismith and one of the high
street’s most notorious brands.

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