September 16, 2013 1:55 pm

French Connection rues rental shackles

Stephen Marks, chairman and chief executive of French Connection, expressed frustration at the reaction of landlords to moves by the fashion retailer to shed unprofitable stores and cut rents, as it narrowed first-half losses.

French Connection has closed five UK stores and is trying to shut another 10. It is also looking for rent reductions.

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But the company had net cash of £22.3m at the end of July, compared with £21.1m a year earlier.

“[Landlords] don’t want to know. They look at our balance sheet and see we have cash and have no interest to discuss anything,” said Mr Marks.

That some other retailers had been able to shed stores through company voluntary arrangements – when they broker a deal with unsecured creditors to avoid entering administration – was “certainly not helpful”, he said.

“People are not helpful when you can pay your bills,” he added.

The comments came as pre-tax loss fell from £6.3m to £6.1m in the six months to July 31, after a £1m reduction in the retail loss from the UK and continental Europe to £8.2m.

“The trend has changed from being downwards. We are beginning to climb up again and that is what we are going to carry on doing,” said Mr Marks.

However, he acknowledged that the retailer was at the early stages of a recovery. “Overall it is a gentle improvement, and that is what we are looking for, to improve as the winter season goes on, and it is starting reasonably well,” he said.

He attributed the progress to more full price, rather than discounted sales, after tighter management of stock, the decision to start the summer sale later and cost control.

Although UK and continental European sales from stores open at least a year fell 4.5 per cent, the gross margin increased 0.8 percentage points.

Overall sales fell from £96m to £89.9m after a decline in wholesale sales to department stores and other retailers and the lower European retail sales.

A summer of positive economic news has raised hopes of a recovery in the retail sector. Mr Marks said there were “small green shoots, but it is early days”.

He said the reaction to French Connection’s autumn collection had been encouraging, with the recent cooler conditions helping demand. “Coats seem to be selling rather well at the moment. It bodes well for the rest of the season,” he said.

The diluted loss per share was unchanged at 6.4p. The shares fell 1.5p to 31.5p.

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