French Connection, the UK-based fashion retailer, has released a trading and funding update that provides a glimmer of hope in the midst of the challenging retail landscape. While the initial sales after reopening on June 15 were low, French Connection observed that customers who missed physical shopping the most were the ones most committed to making purchases. This positive trend indicates that as lockdown restrictions continue to ease in the UK, sales volumes for French Connection are gradually growing week-on-week.

Despite the closure of its physical stores, French Connection was able to maintain its online presence in the UK and the US, resulting in a 24% increase in online sales over the last 15 weeks. The company also continued to supply online wholesale customers and experienced an increase in interactions with its other wholesale customers in the UK and Europe, as they reopened their businesses as well.

The collection of receivables from supportive wholesale customers during the lockdown period surpassed expectations, which is a positive sign for French Connection as it works toward recovering its pre-pandemic position. However, it is important to note that even prior to the crisis, the company had already been experiencing declining sales for several years.

On the funding side, French Connection has been actively cutting costs and conserving cash. It acknowledges the cooperation of its key stakeholders, such as stock suppliers, non-stock suppliers, landlords, and employees, in these efforts. The company has managed its inventory commitments for Autumn/Winter 2020 and secured a £15 million working capital facility with Hilco Capital for the next two years. This funding is expected to be sufficient to cover the company’s cash requirements, based on its current conservative expectations of future trade.

However, French Connection faced difficulties in accessing government-backed financing schemes during the lockdown due to the qualifying requirements. As a result, it anticipates a reduction in its net cash position in the coming months due to working capital funding requirements, tax payments, and deferred amounts owed to landlords and other suppliers as part of its Covid-19 mitigation efforts.

Moving forward, French Connection remains cautious and will continue to carefully manage its expenses. The company is waiting for better visibility on the speed of the recovery of consumer demand across various business channels and territories. Although its stores have reopened with enhanced hygiene and social distancing measures, it is too early to accurately predict the extent to which store footfall and sales will recover. It is also uncertain how this will impact the improvement rate within the wholesale channel. Despite the challenges, French Connection believes it is well positioned to navigate an extended period of uncertain consumer demand.

Useful Links:
French Connection Official Website
Financial Times Article on French Connection