French Connection and Asos figures challenges for high street retailers

By GARETH MACKIE
Published on 19/09/2012 10:07

THE challenges faced by high street retailers in the face of fierce competition from internet rivals have been laid bare in sharply contrasting figures from French Connection and Asos.

News yesterday that French Connection fell into the red during the first half after a 9.5 per cent drop in UK and European retail revenues followed signs of disappointing trading at rival Next during August and September and a drop in sales at high street stalwart Marks & Spencer.

Most retailers have blamed the wettest summer in a century for driving away shoppers and even John Lewis, which has managed to shrug off the gloom afflicting much of its rivals, recently warned that the stellar growth achieved in the first six months of the year will not be maintained in the second half.

However, internet fashion store Asos revealed yesterday that retail sales in the three months to 31 August had soared 31 per cent to £141 million, driven by a 42 per cent jump in international revenues.

Chief executive Nick Robertson said figures for the UK, which showed a 15 per cent increase in sales to almost £50m, were “encouraging” and the group was approaching its new financial year with “continued confidence”.

As well as benefiting from the popularity of online shopping, Asos is cashing in on the cult of the celebrity, with its target market keen to emulate the likes of Alexa Chung, Tulisa Contostavlos and Kate Moss.

Shares in the company soared 289p, or 14 per cent, to 2,330p.

Freddie George, retail analyst at Seymour Pierce, said Asos is expected to post a pre-tax profit of around £44m for the year to the end of August, rising to £58m next year, and he believes the firm – rumoured to have lined up outgoing M&S general merchandise director Kate Bostock as its chief operating officer – can hit its long-term target of £1 billion in annual sales.

Total sales at French Connection, in contrast, fell 7 per cent to £96m in the six months to 31 July and the group, which has some 70 stores across the UK, warned shareholders that it may take “some time” to deliver a sustained recovery.

A “disappointing” performance in the UK and Europe meant it slipped to a pre-tax loss of £6.3m for the first half, compared to a profit of £700,000 a year ago. Its shares fell 2p, or 8 per cent, to 23p following the news.

Chairman and chief executive Stephen Marks said: “We have strengthened our senior management team and will continue to target the disposal of loss-making stores. We are confident that these actions will produce a growing positive impact on our trading performance over the next two financial years.”

Meanwhile, Zara parent company Inditex – the world’s largest clothing retailer – reported a 32 per cent jump in first-half profits to €944m (£757.5m) and said sales since the start of its third quarter have risen 7 per cent.