French Connection; FCUK! An encouraging trading statement!

Monday, Jul 22 2013 by
2

French connection (30p and 2.0% of JIC portfolio) I have bought anew holding in French Connection this morning.

I have to admit that this is based more on a hunch that expectations are now so low that any improvement in trading could have a decent impact on the share price and that the downside is to some extent protected by the valuation. As at 15th May trading statement it had £15.7m cash on the balance sheet compared to £10.4 million at the same stage last year. Its year end, (31st January), cash level tends to be higher; Jan 2013, £28.5m, Jan 2012, £34.2m, Jan 2011, £34.1m, Jan 2010 £35.7m and Jan 2009, £38.4m. The market capitalisation of the Company is currently £27.3m most of which is made up of cash!


Expectations for the year ending January 2014 are low with forecasts of losses of 6.0p per share. Sales are forecast at around £200m, so if it can improve sales and its gross and net margins, there is scope for upside to forecasts. Now I am no fashion guru so I defer to Paul Scott who writing in his blog on Stockopedia on June 7th said “on reviewing their website, the current season ladies wear stock is absolutely excellent - really classic, elegant designs”. He went on to observe that, “I noticed from their website that the Autumn/Winter 2013/14 preview pages show markedly lower price points. This has been a long-standing criticism of French Connection, that their prices are just far too high.” – You can see more of his report at: http://www.stockopedia.com/content/small-cap-value-report-7-jun-qpp-ple-hrn-kcom-trt-fccn-73922/#sthash.HA73FcBD.dpuf


The May 15th trading statement was not altogether bad with it saying “Trading in the period in our UK/Europe retail business is broadly flat on a like-for-like basis on last year. In line with the market generally we saw a strong performance in the early weeks of the year which softened through March but has improved again recently.”


Conclusion; French Connection has been a perennial disappointer but in my opinion the share price reflects this and should trading start to improve, helped by both a better market background as well as its own initiatives, there could be scope for substantial upside. The next trading statement is due on 9th August when it will report on the 6months to 31st July. As this is probably a more risky investment than some of…

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French Connection Group PLC designs and supplies branded fashion clothing and accessories for men and women. The Company operates retail stores and concessions in the United Kingdom, Europe, the United States and Canada and also operates e-commerce businesses in each of those territories. Its principal brand is French Connection, which designs, produces and distributes branded fashion clothing, accessories, such as toiletries and fragrances, shoes, watches, jewelry, eyewear, furniture and homeware through its distribution channels: retail stores, e-commerce, wholesale and licensing. Its other brands include, Great Plains and YMC. The Company operates in approximately 50 countries around the world. The Company's subsidiaries include French Connection Limited, French Connection UK Limited, French Connection (London) Limited, Contracts Limited, French Connection Group Inc., French Connection (Hong Kong) Limited, French Connection (Canada) Limited and YMC Limited. more »

LSE Price
43.4p
Change
 
Mkt Cap (£m)
41.9
P/E (fwd)
31.2
Yield (fwd)
n/a



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6 Posts on this Thread show/hide all

johnrosier 21st Nov '13 1 of 6
1

French Connection (40p and 3.0% of JIC) has issued a trading statement for the 16 weeks up to yesterday. On a like-for-like business revenue in the retail business increased by 2.1% which should be at a decent margin as the company says the l-f-l performance was “despite lower levels of clearance”. It goes on to say that it is encouraged by the reaction to the autumn range which is the first collection from its new design team. It is seeing a “growing impact from the operational improvements that have been implemented”.


In the UK/Europe wholesale business, whilst revenue is in line with last year this is a welcome change with the downward trend being arrested. It says the order book for spring 2014 is ahead of last year.


Conclusion; this is the first bit of good news for some time from French Connection. This just may be the first sign that it is getting customers back into its stores, exciting them with its product offering and price points and that a recovery in sales is underway. As the Company itself warns, the full year results will be dependent upon the performance over the key Christmas trading period, but there does seem to be some cause for optimism. The shares have been strong recently, with a new shareholder declaring a near 5% stake in the last week and also the new FD dipping his hand in his pockets and buying £12,400 shares. Hopefully the recovery in the share price which started last month will receive another boost. Very Happy Holder!

Website: JohnsInvestmentChronicle
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tiswas 21st Nov '13 2 of 6

Market having second thoughts John?

 

Must admit I had thought the news was encouraging, albeit lacking in detail.

I see Numis retain their add and 45p target.

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Paul Scott 21st Nov '13 3 of 6

Bizarre market reaction this afternoon - this is the best (relatively speaking!) trading news we've had from French Connection (LON:FCCN) in recent years, yet the shares are now actually down 6% on the day (after being up earlier this morning). Most peculiar. It's not as if sentiment has been positive here amongst investors - quite the opposite! Usually anything short of armageddon and the shares are fine. So when they do issue signs of a turnaround, the price actually falls! Anyway, it's a buying opportunity in my view, so I've bought some more.

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Pantheon 21st Nov '13 4 of 6

Just bought a small amount at 38.75. Lets hope the price moves upwards towards its lofty previous highs...
Incidentally, any reason why the date at the top of this screen reads Mon Jul 22? The comments above and the OP are about today's news ... aren't they?

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cig 21st Nov '13 5 of 6

In reply to post #79328

Volumes are microscopic though (surprisingly to me, I expected more for this kind of stock), it only takes 1 "big" investor who decides to get rid of say a £50k lot (even in stages) for whatever reason (buy a caravan?) to drown the amateurs (all 20 of them) with their £2k lots. If you had a big lot to dispose of you may actually want to sell into a good news day when there are a few more of the amateurs.

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johnrosier 22nd Nov '13 6 of 6

Agree it is a buying opportunity! Schroders announced yesterday that its stake in FCCN had fallen by 2.5m shares to 11.84m shares or 12.35%! Who knows what they are up to but if they are selling down their stake let's hope they are wrong. It's possible!

Website: JohnsInvestmentChronicle
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