French Connection warns it is running out of cash

Clothing retailer says it needs new funding or better sales as coronavirus crisis hits chain

Ailing fashion retailer French Connection has warned it will run out of cash within the next few months unless it secures a cash injection or sees an improvement in sales.

The retailer, which was forced to close all 68 of its stores and concessions in the UK as well as many overseas outlets in March as part of measures to control the spread of coronavirus, said it had seen a significant reduction in sales.

While online trade has jumped 44% and the brand continues to receive wholesale orders from some customers as some of its stores in Europe have begun to reopen, French Connection said this activity could not support the business. Some wholesale clients in the US have also delayed payments for stock supplied.

“In the light of the company’s current cash position and the continued expected weak trading environment, we have been in active discussions with a number of potential funding partners,” French Connection said in a statement to the stock market.

The company, which was founded in 1972 and also owns the Great Plains brand, said it was confident of raising sufficient funds to support the business until trading improved and these talks were “proceeding well”. But the statement made clear: “Without securing additional funding and should the current Covid impacted trading levels continue, the company’s cash resources will eventually be eroded in the coming months.”

French Connection is preparing to reopen UK stores on 1 June, the current deadline for non-essential retailers to restart high street trading under the government’s coronavirus plan. It said: “We look forward to returning to more normal levels of trade as the situation evolves, although we do not expect this for some time to come.”

In an effort to conserve cash, French Connection said that it was talking to landlords about rent holidays or deferments, asking suppliers for discounts or extended payment terms and rescheduling tax payments in the UK. About 90% of its 780 staff are also on furlough under the government’s job protection scheme.

The company said it had tried to access further funds from government support schemes but had been unable to do so because of “tight qualification constraints”.

French Connection has spent years in the doldrums most recently reporting a £7.3m annual pretax loss after sales fell nearly 12% to £120m. At the group’s year end in January, the company said cash reserves had halved to £8m.

The retailer, more than 40% of which is owned by founder and chairman Stephen Marks, with Mike Ashley’s Fraser Group holding 26% of the company, spent over a year looking at “strategic options”, including a sale of the business. In January, the company said it had shut down the sale process and would remain listed on the stock exchange.

French Connection’s latest difficulties emerged as luggage brand Antler said it had collapsed into administration with the immediate loss of 164 retail jobs.

The brand is owned by Strandbags, the Australian and New Zealand based retailer which is controlled by South African fashion tycoon Michael Lewis, the fiance of Princess Diana’s niece Lady Kitty Spencer. Lewis also controls The Foschini Group, owner of UK high street chains Whistles, Phase Eight and Hobbs.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Will Wright, partner at KPMG who was appointed joint administrator of Antler on Tuesday, said: “Like so many companies across the retail and travel sectors, Antler has been profoundly impacted by the Covid-19 pandemic. Although the business was trading well prior to the virus outbreak, restrictions imposed at the start of the lockdown period prompted the closure of Antler’s retail and wholesale outlets, while the impact on international travel has also significantly affected sales.

“With uncertainty over the lifting of travel restrictions placing further financial strain on the business, the directors concluded that they had no option but to appoint administrators.”

A further 35 jobs at Antler remain at risk.

Contributor

Sarah Butler

The GuardianTramp

Related Content

Article image
Pizza Hut to close 29 restaurants, putting 450 jobs at risk
See the full list of sites to shut under the company’s planned rescue deal

Sarah Butler

11, Sep, 2020 @11:52 AM

Article image
French Connection extends deadline to find buyer
Talks with potential buyers continue as struggling fashion chain makes further losses

Sarah Butler

17, Sep, 2019 @3:55 PM

Article image
How the Cineworld closures could turn leisure parks into a disaster movie
Experts fear firm’s mothballing of UK cinemas will spark a grim chain reaction for surrounding hospitality trade

Zoe Wood

10, Oct, 2020 @7:00 AM

Article image
Sports Direct increases French Connection stake to 27%
Mike Ashley’s firm has bought out activist investors, increasing its own share percentage close to the 30% threshold whereby it must launch a takeover bid

Sarah Butler

28, Jul, 2017 @6:05 AM

Article image
Mike Ashley's Frasers Group sells stake in French Connection
Move announced after fashion retailer revealed takeover approaches

Sarah Butler

08, Feb, 2021 @6:19 PM

Article image
French Connection receives two takeover approaches as shares surge
Struggling retailer attracts Spotlight Brands as well as Go Global Retail

Mark Sweney

05, Feb, 2021 @3:47 PM

Article image
French Connection boss accused by investors of 'not playing it clean'
Stephen Marks’ handling of fashion chain criticised after controversial board reappointment in wake of years of losses

Sarah Butler

29, May, 2017 @1:36 PM

Article image
French Connection boss dismisses calls for him to relinquish dual role
Company says changing Stephen Marks’s responsibilities would risk derailing turnaround plan, as it reports £7.9m loss

Zoe Wood

20, Sep, 2016 @5:29 PM

Article image
French Connection shares jump after entrepreneur makes bid
Shares increased by 15% although company said no guarantee offer would be made by latest bidding consortium

Sarah Butler

23, Sep, 2021 @5:19 PM

Article image
Sports Direct's French Connection flutter looks like a fashion faux pas | Nils Pratley
Mike Ashley showed typical disregard for shareholders’ concerns when he bought a needless stake in the struggling chain

Nils Pratley

02, Feb, 2017 @9:04 PM