French Connection blamed a tough retail backdrop for a slump in sales last year but said it had managed to keep open a handful of stores previously earmarked for closure after some landlords offered more flexibility on onerous lease terms.
The struggling fashion chain, which shot to prominence with its notorious FCUK T-shirt slogan in the 1990s but has struggled in recent years, said like-for-like store sales fell 6.8% in the year to 31 January, with sales from its websites down 3.7%.
Stephen Marks, the chairman and chief executive who created the brand in 1972, said difficult trading conditions on the UK high street were weighing on sales.
However, French Connection, which last year put itself up for sale, made a small underlying pretax profit of £100,000 – its first full-year profit in seven years – compared with a £2.1m loss the previous year.
Marks said the company had closed 10 stores and concessions last year, but had managed to keep a further four stores open that had been expected to close because some landlords were becoming “more flexible” on terms at the end of leases.
He said: “Given the current environment the renegotiation of leases is now becoming more favourable to tenants and better deals are available certainly in the short term.”
The four stores are still likely to close this year, he said, along with eight others, but this will depend on the individual negotiations on each site. The firm has 96 standalone stores and concessions, and 195 franchised and licensed stores worldwide.
Retailers are battling falling consumer spending, a switch to online shopping and rising costs from higher minimum wage levels and business rates. The pressures have forced some out of business while others have resorted to company voluntary arrangements (CVAs), a form of insolvency that allows them to seek rent cuts and shut stores while staying in business. Seventy thousand retail jobs were lost in the final months of 2018, according to the British Retail Consortium.
Last autumn, French Connection put itself up for sale after Marks, who owns 42% of the company, came under growing pressure from investors to relinquish control after years of losses.
The firm said on Tuesday it was talking to several potential bidders and expected to complete its strategic review in the first half of this year.
Mike Ashley’s company Sports Direct is the other major shareholder with a 27% stake – close to the 30% level at which it must launch a takeover bid.
Faced with the decline of the high street, French Connection has been shifting its business towards wholesale and started closing loss-making shops five years ago. It supplies department stores in the US such as Bloomingdales and Nordstrom, as well as the online arms of UK and European retailers.
Total revenues rose by 0.2% to £135.3m last year. Including one-off items, losses widened to £9.3m from £3.8m.
The firm made a £11.7m gain from the sale of the Toast brand in April, but this was offset by provisions for onerous retail leases, debt impairment and store closure costs.
Sofie Willmott, a senior retail analyst at Global Data, said: “In the competitive UK clothing market, French Connection’s more subtle brand handwriting fails to stand out against more distinctive players such as Ted Baker, Reiss and Whistles, which all have a clear design direction. To return to like-for-like growth, French Connection must give consumers a clear reason to shop with the brand by refining its range.”