Sales figures are still heading in the wrong direction at French Connection but at least the clothing retailer is hitting the brakes as it seeks to turn around.
The group said that trading during the six months to July 31st has been broadly in-line with its expectations, with group revenue 7% below the level achieved during the same period last year.
After the first quarter end revenue was down 9.5% so this marks an improvement.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
First half gross margin was also lower, the result of additional discounting, meaning the operating result from continuing operations for the half-year will be around £7m below last year.
Net cash at the end of the period was in the region of £20m.
On the downside, the group is losing access to US department store group Sears. Following a change in strategy by Sears management, the supply agreement between French Connection's partner LF USA (part of Hong Kong consumer goods group Li & Fung) and Sears for products branded "UK Style by French Connection" has been terminated.
The agreement generated net income of £1.9m for French Connection in the year to January 31st 2012. It is now expected that the income from the licence for the following clothing retailer current financial year will be in the region of £0.9m.
The firm stressed that a number of new licensing opportunities are currently being developed and said its other existing brand licences, in particular toiletries and eye-wear, continue to perform well.
French Connection added that the initial reaction to its new winter collections has been "encouraging" but warned its experiences in the first half of the year "are leading us to be very cautious in our outlook for retail revenue in the second half of the year".
Continued revenue growth in North America has gone some way to offsetting the previously reported decline in UK orders, which continue to be slightly below the levels seen at this time last year.
The firm's review of the UK/Europe retail operation is well advanced and it has commenced in-store trials addressing the customer proposition and experience with the goal of improving sales densities and margin while reducing costs, the company added.
The share price climbed 8.07% to 21.75p by 09:05.
NR
