French Connection endures fifth year of losses as revenue falls

French Connection (LSE: FCCN.L - news) has reported its fifth consecutive year of annual losses as it continues to battle a series of problems within the business.

The fashion chain said pre-tax losses for the year to 31 January grew 51% to £5.3m - reflecting continuing problems in its wholesale and licensing divisions and the effects of store disposals and closures.

While operating losses eased, group revenue fell 6.7% to £153.2m.

Like-for-like sales in the UK and Europe, which account for more than three quarters of total revenue, rose 4.4%.

The company's founder, chief executive and chairman Stephen Marks, said the results reflected an "improvement in performance" but he acknowledged the tough trading environment was limiting progress.

He has come under pressure from activist investor Gatemore Capital Management, which has an 8% stake.

It has urged a shift in strategy to deliver value by either splitting the company up or exploring a sale. It is also pushing for the role of chief executive and chairman to be divided.

Mr Marks has been closing more stores - nine of them in the last financial year - and is targeting to hold onto only 30 full-price shops by 2019 as French Connection seeks a return to profitability.

Its problems include stiff competition - especially from the more nimble online retailers such as ASOS - and higher import costs arising from the pound's weakness since the Brexit vote.

The spectre of rising prices, to help account for those extra currency costs, risks damage to sales in its core UK market.

Mr Marks remained upbeat.

He said: "The noticeable improvement we have seen during the second half and into the new financial year leads me to believe that we are moving in the right direction.

"The reaction to this year's collections has been very strong so far with sales both in our stores and wholesale customers up on last year.

"It is early in the year and we have a considerable amount of work to do to take the Group back to profitability although I believe that the actions we have taken and continue to take, will go a long way to achieving that goal this year."

Its shares rose 2% on opening to 36.6p. In 2004 they were trading at 500p.

Last month, Mike Ashley's Sports Direct took an 11% stake in French Connection, becoming its second-largest shareholder behind Mr Marks himself who owns more than 40%.

It is not clear what intentions were behind the investment.