French Connection has insisted that its turnaround is on track as it narrowed its losses for the first six months of the year but reported a sharp fall in sales at its stores.
The fashion retailer made a group loss of £3.9m for the six months to 31 July, down from £6.1m a year ago. Stephen Marks, its founder and chief executive, said the figures were "a further step forward as we rebuild value in our business".
"The initiatives we put in place to drive a turnaround in our trading continue to deliver an improvement in performance," he said.
The brand has struggled in recent years as cheaper high street rivals such as Topshop, Zara and H&M stole the march. To win back customers the retailer has hired a new design team and set about closing unprofitable stores. It has also reduced the level of discounting in its stores – there was no mid-season sale and it delayed its summer sale by a week as well as keeping price reductions smaller.
Marks pointed to hit products such as its £225 oversized Palace wool coat, with the first batch selling out last month, as evidence of the chain's improved appeal. Strong orders for the winter and spring seasons were also evidence of the strength of its new collections, he said.
The closure programme led to a sharp fall in sales at its retail division, where turnover tumbled 10.6%. The retail arm's operating loss of £7.5m was partially offset by the strong performance of its wholesale division which delivered an operating profit of £6.2m. The retailer shut four loss-making stores during the period and said it planned to close a similar number in the second half.
Although the headline performance was in line with market expectations some analysts were concerned about the outlook. Marks said it was a "very competitive market place" and added that he was cautious going into the key Christmas trading period. Fears about the outlook weighed on shares, which closed down more than 12% at 60p.
Conlumino analyst George Scott said the performance showed French Connection remained "a work-in-progress".
"However the impact of its new design team now seem to be feeding through to retail, as seen in more positively consistent like-for-like sales at home and on the continent."
Scott also welcomed the move away from discounting which was not only boosting profit margins but "helping to steer the brand slightly more upmarket, which together with its newer design credentials is giving it a fresher edge".