Ailing fashion retailer French Connection has warned it will run out of cash within the next few months unless it secures a cash injection or sees an improvement in sales.
The retailer, which was forced to close all 68 of its stores and concessions in the UK as well as many overseas outlets in March as part of measures to control the spread of coronavirus, said it had seen a significant reduction in sales.
While online trade has jumped 44% and the brand continues to receive wholesale orders from some customers as some of its stores in Europe have begun to reopen, French Connection said this activity could not support the business. Some wholesale clients in the US have also delayed payments for stock supplied.
“In the light of the company’s current cash position and the continued expected weak trading environment, we have been in active discussions with a number of potential funding partners,” French Connection said in a statement to the stock market.
The company, which was founded in 1972 and also owns the Great Plains brand, said it was confident of raising sufficient funds to support the business until trading improved and these talks were “proceeding well”. But the statement made clear: “Without securing additional funding and should the current Covid impacted trading levels continue, the company’s cash resources will eventually be eroded in the coming months.”
French Connection is preparing to reopen UK stores on 1 June, the current deadline for non-essential retailers to restart high street trading under the government’s coronavirus plan. It said: “We look forward to returning to more normal levels of trade as the situation evolves, although we do not expect this for some time to come.”
In an effort to conserve cash, French Connection said that it was talking to landlords about rent holidays or deferments, asking suppliers for discounts or extended payment terms and rescheduling tax payments in the UK. About 90% of its 780 staff are also on furlough under the government’s job protection scheme.
The company said it had tried to access further funds from government support schemes but had been unable to do so because of “tight qualification constraints”.
French Connection has spent years in the doldrums most recently reporting a £7.3m annual pretax loss after sales fell nearly 12% to £120m. At the group’s year end in January, the company said cash reserves had halved to £8m.
The retailer, more than 40% of which is owned by founder and chairman Stephen Marks, with Mike Ashley’s Fraser Group holding 26% of the company, spent over a year looking at “strategic options”, including a sale of the business. In January, the company said it had shut down the sale process and would remain listed on the stock exchange.
French Connection’s latest difficulties emerged as luggage brand Antler said it had collapsed into administration with the immediate loss of 164 retail jobs.
The brand is owned by Strandbags, the Australian and New Zealand based retailer which is controlled by South African fashion tycoon Michael Lewis, the fiance of Princess Diana’s niece Lady Kitty Spencer. Lewis also controls The Foschini Group, owner of UK high street chains Whistles, Phase Eight and Hobbs.
Will Wright, partner at KPMG who was appointed joint administrator of Antler on Tuesday, said: “Like so many companies across the retail and travel sectors, Antler has been profoundly impacted by the Covid-19 pandemic. Although the business was trading well prior to the virus outbreak, restrictions imposed at the start of the lockdown period prompted the closure of Antler’s retail and wholesale outlets, while the impact on international travel has also significantly affected sales.
“With uncertainty over the lifting of travel restrictions placing further financial strain on the business, the directors concluded that they had no option but to appoint administrators.”
A further 35 jobs at Antler remain at risk.