Alarm bells were ringing in the retail sector today after fashion chain French Connection revealed a shock 17% sales fall over the past five weeks.
French Connection shares dropped 3% after it admitted its recent ranges had not been in tune with the demands of fashion-savvy shoppers – relying too heavily on successful styles of past seasons.
The like-for-like sales performance, which followed a 12% drop over the year to December 31, gave weight to a British Retail Consortium (BRC) survey today which found that clothing sales worsened during February.
Womenswear was particularly weak as freezing conditions kept shoppers at home during a month when overall retail sales fell 0.3% on a like-for-like basis, the BRC said.
Today’s news from French Connection also follows a warning from high street stalwart Boots that trading had remained subdued since the toughest Christmas in years.
Investors in retailers were showing renewed signs of a crisis of confidence today, with shares in clothing firms such as Next and Marks & Spencer on the slide.
French Connection chairman Stephen Marks said recent trading had been “very disappointing”, but the positive response of shoppers to recent additions to its ranges offered hope that the company was starting to turn the corner.
Mr Marks said: “I can see signs of improvement and beginnings of a recovery and, while it is still early days, we go forward feeling positive about the changes that are being made.”
Measures to resuscitate sales have included a shake-up of the buying teams, an overhaul of how clothes are presented in stores and new ranges to strengthen its summer offering.
Spending on advertising in the UK has also been increased to beef up the nationwide billboard and magazine campaigns taking place this month and in April, which will continue to feature the “fcuk” logo that has been criticised by some analysts.
Annual profits of £33m (€47.8m) were in line with expectations after the group warned last year that it would not be able to match its haul of £38.7m (€56m) in 2003.
The group was forced to slash prices of its clothing ranges to shift excess stock, contributing not only to the profits fall but also a 1% decline in turnover to £265.7m (€384.5m).
Evolution Securities analyst Nick Bubb said the recent cold snap had fuelled fears of lower sales since the end of January, but added: “We didn’t expect them to be 17% down, like-for-like.”
He also noted the cautious noises being made about wholesaling of its latest ranges with repeat orders at a lower level than last year.
Although the response to the Winter 2005 ranges have been good, French Connection said its customers were reluctant to commit themselves because of the poor performance of last year’s items, leaving order books for that season slightly behind last year.
Some comfort was offered to investors in the form of a 54% hike in the annual dividend to 5p, while ongoing takeover speculation also helped to prop up the price of French Connection shares.
Richard Ratner, of broker Seymour Pierce, said the current ranges were better and the company should have a “much better” second half to its financial year.