French Connection, the British fashion retailer, is facing a cash crunch as the Covid-19 pandemic continues to impact its operations. In a recent trading update, the company issued a warning that without additional funding and if current trading levels persist, its cash resources will be depleted in the coming months. However, French Connection is optimistic that it can secure sufficient funds to sustain the business until trading levels recover.
The retailer has been actively engaging in discussions with potential funding partners and is making progress on due diligence and negotiating terms. It remains hopeful that it will be successful in raising the necessary funds to support its operations. This need for additional cash comes at a time when French Connection was already facing challenges before the pandemic. Since the start of the lockdown, its shops and concessions have been closed, resulting in no physical sales.
Despite the difficult situation, there are some positive signs for the company. French Connection has seen an increase in online sales through its websites in the UK and US, with a 44% rise in sales over the past six weeks. It has also managed to continue supplying a few online wholesale customers who are still trading. However, e-commerce sales still only account for a small portion of its overall business. The company has also observed a slight increase in activity as European countries begin to reopen.
To conserve cash and reduce costs, French Connection has taken several actions. It has been in discussions with suppliers to extend payment terms and secure discounts. Negotiations with landlords for rent holidays or deferred payments are also underway. Additionally, the company is managing its future goods supply from factories to align with current requirements, reflecting the expected lower level of trade for the rest of the year. Payments to the UK tax authority, HMRC, have also been rescheduled.
Similar to many other retailers, French Connection has faced challenges accessing government support initiatives. While it has utilized the Job Retention Scheme and rates relief, securing additional funding has been difficult due to strict qualification constraints imposed by the government.
The company’s focus is now on preparing for the phased reopening of its stores from 1 June following the recent update from the UK government. Plans are being developed to ensure a safe environment for customers and staff when stores reopen. However, French Connection recognizes that it will take time for trading to return to normal levels.
Despite the cash crunch and ongoing challenges, French Connection remains determined to withstand the impact of the pandemic. With efforts underway to secure additional funding and plans for store reopenings being formulated, the company is eagerly anticipating a return to more normal levels of trade in the future.