25 May 2012

French Connection woes continue

03/02/2012 Ben Jaglom

Clothing retailer French Connection (FCCN) expects profits to be below expectations after warning of 'disappointing' trading.

The FTSE Small Cap constituent warned in an update for the year to December that trading in its stores had been 'disappointing' in the autumn/winter season, adding that this had 'continued through the Christmas trading period'. The company notes that the effect of this has been to 'negate' growth in like-for-like sales that took place in the first half of the year and will result in gross margins that are 'lower than expected'.

However, it remarked that wholesale deliveries in the second half of the year had 'shown good growth', maintaining that, in addition, orders for the spring/summer season are 'ahead of this time last year'. Its international operations were described as continuing to 'perform strongly'.

Pre-tax profits of £4.7 million for the year to January 2012 are now expected by the group. Consensus forecasts were of profits of £6.6 million, with analysts at Seymour Pierce forecasting profits of £7 million prior to the profit warning.

Growth Company Investor rated shares in French Connection with a reduce last March at 127.75p and they currently trade at 56p, having fallen 56 per cent since. We last rated shares in the group with a sell recommendation last November at 59.75p, and with continuing pressure on the group and wider pressures on consumers likely to intensify, we reiterate that advice.

Tags: British retail, French Connection, GCI Sells

Sector: General Retailers

Companies: French Connection

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