Our Business

Business objectives, strategy, and business model

At the heart of our business is a passion for the clothes. In 1972, when French Connection was conceived, we set out to create well-designed, stylish clothing that appealed to a broad market. We have since worked hard to build on that vision and as a result, French Connection is synonymous with fashion and style.

It remains our prime goal to create distinctiveness in a crowded market place through focus on design. The brand's strength lies in balancing new, exciting ideas with consistent quality and affordability and in a world of "fast fashion" we are proud of our commitment to the creative process.

With a passionate focus on fashion underpinning the business our aim is to generate increased shareholder value through the sale of fashion products and the extension of our brands into other lucrative markets through licensing. We continually assess markets and relationships for new opportunities to broaden our customer reach.

Founded by Chairman and Chief Executive Stephen Marks, French Connection’s long history of success has been based on design quality and innovative fashion, supported by a strong market presence resulting in one of the most highly recognised and respected clothing brands in the UK and across the world. We seek to ensure that products are presented for sale in contemporary surroundings by knowledgeable and friendly staff who are in-tune with our customers. We recognise that our products are the core element of our business and that our ability to produce fashionable clothing to match our customers’ expectations has been, and continues to be, the key to our continued success.

We seek to ensure that our resources are deployed effectively and efficiently to support our business. Design and production of the ranges and maintenance of our operating standards are paramount for all our business managers who have broad responsibility for their area of operations.

Brands

Our principal brand is French Connection which accounts for 86' of the Group's revenues.

The French Connection brand operates in the fashionorientated market place offering a fashion-forward range of quality products at affordable prices. Our customers, typically aged 18-35, appreciate that the brand is at the leading edge of high street fashion and offers quality and style in its products. French Connection designs, produces and distributes branded fashion clothing, accessories and homeware for men, women, and children to more than 50 countries around the world through its main distribution channels: retail stores, ecommerce, wholesale and licensing.

Our other brands include:

Toast: a range of beautifully crafted ladies’ and men’s clothing and unique homeware, available on-line, in selected John Lewis stores and through branded high-street stores;

Great Plains: a fashion basics range designed in-house and supplied through wholesale to multi-brand retailers and available on-line mainly in the UK; and

YMC: a fledgling, edgy, contemporary fashion brand for men and women with two stores in London, a growing wholesale base and available on-line.

Each brand targets a different audience and has achieved high levels of recognition for style and design reflecting the creative passion and skill poured into the design and manufacture of their products.

Our operations

We design, produce and distribute branded fashion clothing and homeware from our business premises in London, New York, Paris, Düsseldorf, Hong Kong and Toronto. We operate retail stores and concessions in the UK, Europe, US and Canada and also operate ecommerce businesses in each of those territories. Further, we wholesale our products to retailers operating in over 50 countries around the world and have licensed partners operating French Connection stores across Asia, Australia and the Middle East.

Our design teams are based in London and we arrange for the products to be manufactured in specialist third party factories in Europe and Asia supervised by local buying offices. The main countries where manufacturing takes place are China, India and Turkey.

The Group retails garments through a network of stores on high streets and in shopping malls across the UK, Europe and North America and through concessions within leading department stores such as House of Fraser. We also operate ecommerce channels in the UK, Europe and North America.

The product ranges are also offered for sale at wholesale through our showrooms in London, New York, Paris, Düsseldorf and Hong Kong to selected customers operating department stores, multi-brand fashion stores or ecommerce sites around the world.

To further extend retail distribution we have granted franchises and licences to quality retailers allowing them to operate French Connection branded retail stores in Europe, the Middle East, Asia and Australia. These customers are supplied through our wholesale channels in the UK and Hong Kong. Our licensees operating stores in Hong Kong and China are 50% Joint Venture businesses operated by our local partners in those territories.

Brand extensions

Our globally recognised French Connection brand has been extended successfully into complementary licensed products including men’s and women’s toiletries and fragrances, shoes, watches, jewellery, eyewear and furniture. Our Design and Licensing teams work closely with branded partners to develop and enhance product for sale.

Current trends

The continued growth of multi-channel retailing is a clear focus for French Connection. We will continue to invest in the people and systems to support this growth opportunity to ensure our customers can shop with us however they wish and get the very best multi-channel experience. The success of our CRM system is an example of this investment.

Worldwide Operations

Region Location Territories Retail Operations Wholesale Customers Licensing Brands
UK/Europe London, Paris, Düsseldorf UK, Europe, Middle East Retail stores and concessions, ecommerce Department stores, multi-brand stores, franchise operators Product and country licensing French Connection, Great Plains, Toast, YMC
North America New York USA Retail stores, ecommerce Department stores, multi-brand stores Product licensing French Connection, YMC
Toronto Canada Retail stores, ecommerce Department stores, multi-brand stores French Connection
Rest Of World Hong Kong Hong Kong, China Retail stores and concessions through joint ventures Product licensing French Connection
Australia, Asia Brand licensees, concessions, department stores Product licensing French Connection

Retail Locations

31 January 2016 31 January 2015
Locations sq ft Locations sq ft
Operated locations
UK/Europe
French Connection Stores 60 169,370 62 183,358
French Connection/Great Plains Concessions 54 35,491 55 35,363
Toast Stores 11 13,105 11 13,425
YMC Stores 2 1,355 2 1,355
127 219,321 130 233,501
North America
French Connection US Stores 4 14,021 6 19,719
French Connection Canada Stores 2 4,650 7 18,125
6 18,671 13 37,844
Total operated locations 133 237,992 143 271,345
French Connection licensed & franchised
UK/Europe 6 6,544 7 8,527
North America 1 2,000 1 2,000
Middle East 10 19,402 9 17,895
Australia 143 106,775 74 75,544
Hong Kong 8 11,859 8 12,892
China 19 29,191 27 31,959
India 80 44,233 89 47,712
Other 21 16,863 35 32,347
Total licensed & franchised locations 288 236,867 250 228,876
Total branded locations 421 474,859 393 500,221

Principal risks and uncertainties

The Board recognises there are a number of risks and uncertainties that face the Group. The following highlights some of the principal risks:

Risk Impact Mitigation
Fashion and design Our success depends on our ability to produce ranges of garments which are attractive to potential customers.

We seek to achieve this through retention of experienced and skilled designers and merchandisers and by remaining as operationally flexible as possible particularly in relation to our supply chain and up front commitments.

Each year the brands produce two main seasonal fashion ranges and the success of each of these is largely dependent on the ability of our designers to reflect attractively the emerging trends in fashion. We utilise a mix of experience and fresh thinking in our design studios under the consistent guidance of the senior management to ensure continuity of the brand attitudes.

Brand and reputational risk Our brands and the way they are perceived in their respective markets is very important to us. We are very protective of the brands and work to ensure that they are presented in appropriate ways and that they are not misused. A main driver for brand perception is the products themselves and therefore our reputational risk is closely linked to our sales success.
Macroeconomic factors The nature of fashion retail means that it is not always possible to predict customers’ reactions to each season’s new ranges. Our customers’ propensity to spend on clothing is also affected by their personal financial situation and other macroeconomic factors which impact the total size of the retail markets in which we operate. We consider that as a small operator at the upper end of the middle market the impact on our business of macroeconomic elements is considerably smaller than the impact of the success of our designers in producing attractive products.
Supply chain The Group is exposed to supply chain operational risk if product is not delivered in a timely fashion, to specification or in appropriate quantities. The Group’s supply chain is diversified across a number of suppliers in different countries. Our buying offices and production teams work closely with suppliers to mitigate these risks.
Infrastructure The design process and our retail businesses in particular have a significant proportion of fixed costs giving rise to operational gearing and this is exacerbated by upward-only rent reviews. To mitigate cost pressures we are constantly focused on store operating cost efficiencies, and have already achieved considerable savings by optimising our rostering timetables in store and actively managing our store estate, and exiting stores where the opportunity is economically available to us.
Financial risks The Group is exposed to financial risks including currency, interest and liquidity.

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group monitors its cash position on a regular basis through the use of regularly updated cash flow forecasts, and believes that it has sufficient and appropriate net funds and facilities available.

As a wholesaler we also face the risk of default from our customers and manage this through active relationship management by our dedicated customer accounts team. Our experience of bad debts has been very low over many years due to this close management. We also insure certain overseas debt risk.

The principal treasury risks to the Group arise from exchange rate fluctuations. The Board has approved policies for managing these risks, which are reviewed on a regular basis, including the use of financial instruments, principally forward foreign exchange contracts.

IT The Group is dependent on reliable IT systems for managing and controlling its business and for providing efficiency and speed in the supply chain. Our IT function oversees all the systems and has policies and procedures to protect the software, hardware and data and to prevent unauthorised access to the systems.

The Group's approach to the management of risks is further discussed in the Corporate Governance Statement.

Key Performance Indicators

The Board considers that the key performance indicators for the businesses are:

  • UK retail LFL sales growth;
  • Sales achieved in the wholesale channels;
  • Sales by geography;
  • Gross margin %;
  • Underlying operating profit/loss; and
  • Inventory levels.
Each of the above is discussed in more detail in the Financial Review.