LONDON (ShareCast) - Upmarket fashion brand French Connection presented an underwhelming performance in the first quarter after group revenue dropped 9.5 per cent below the level achieved in the same period last year, hit by disappointing sales volumes in the UK/Europe division.

Revenue in UK/Europe retail was 10% below last year in total and 12% lower on a like-for-like basis, which the firm said was still in line with its expectations. Forward orders for Winter 2012 are currently slightly below the levels at the same time last year.

The group also delivered a lower gross margin following a stronger demand for discounted product during the winter sale. However, the firm's new ranges, the Premium Collection and French Connection Home, both performed well. Good growth was also seen through its eCommerce channel.

Revenue in the US was up by 11% while the net operating results was well ahead of the previous year.

In a statement the company said: "The UK retail market remains particularly challenging and the combination of prevailing consumer caution and ongoing economic difficulties suggests that this will not improve in the second half of the year. We therefore remain cautious about the outlook for the rest of the financial year.

"Given this, it appears unlikely that our profit performance for the full year will meet current market expectations. Addressing this, the review of our UK/Europe Retail business is well underway and we expect to identify initiatives that can be implemented in the short-term as well as longer-term strategies for improving the performance of the business."

The balance sheet remains strong with £11.3m of net cash at the end of April 2011 (April 2011: £18.5m), the reduction reflecting the decline in revenue during the period along with other temporary working capital movements.

NR

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