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French Connection warns it is running out of cash
19th May 2020 15:01
(Sharecast News) - French Connection said it would run out of cash unless it raises funds or trading improves with all its stores closed during the coronavirus crisis.
The struggling fashion retailer said it was trying to conserve cash because of reduced sales and delayed payments from wholesale customers, particularly in the US. The company was forced to close its 68 UK stores and concessions and many overseas outlets in March as governments shut down economic activity to thwart the spread of Covid-19.
The company said it was in talks with potential sources of funding and that it was confident about raising enough money to support it until trading picks up. But it said without doing so it would run out of money.
"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 said.
Online sales have increased 44% over the past six weeks and some wholesale customers are ordering stock, the company said. Some shops in Europe have also started to reopen as restrictions are lifted.
French Connection said it had tried to take part in government support schemes had used the UK's furloughing and business rate relief programmes. But it said tight qualification requirements meant it had not qualified for other relief measures.
The government requires businesses to have been healthy before the crisis to receive support from the Bank of England, which is buying companies short-term debt. French Connection reported a £7.3m loss for its last financial year.
The company, founded in 1972, said it was in talks with landlords about rent holidays or delays, seeking discounts or payment delays from suppliers and rescheduling UK tax payments to get through the crisis. It said it was planning to reopen some stores from 1 June under government plans to get the economy moving again.
"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," the company said.
French Connection has struggled for many years since its FCUK caught the public imagination in the late 1990s. Like many clothing retailers it has been squeezed by fast fashion operators like Zara at one end of the market and high end brands at the other. It has also been through a series of failed rebirths.
The company, founded in 1972 a year after the film of the same name, considered selling itself before scrapping the idea in January.
The struggling fashion retailer said it was trying to conserve cash because of reduced sales and delayed payments from wholesale customers, particularly in the US. The company was forced to close its 68 UK stores and concessions and many overseas outlets in March as governments shut down economic activity to thwart the spread of Covid-19.
The company said it was in talks with potential sources of funding and that it was confident about raising enough money to support it until trading picks up. But it said without doing so it would run out of money.
"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 said.
Online sales have increased 44% over the past six weeks and some wholesale customers are ordering stock, the company said. Some shops in Europe have also started to reopen as restrictions are lifted.
French Connection said it had tried to take part in government support schemes had used the UK's furloughing and business rate relief programmes. But it said tight qualification requirements meant it had not qualified for other relief measures.
The government requires businesses to have been healthy before the crisis to receive support from the Bank of England, which is buying companies short-term debt. French Connection reported a £7.3m loss for its last financial year.
The company, founded in 1972, said it was in talks with landlords about rent holidays or delays, seeking discounts or payment delays from suppliers and rescheduling UK tax payments to get through the crisis. It said it was planning to reopen some stores from 1 June under government plans to get the economy moving again.
"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," the company said.
French Connection has struggled for many years since its FCUK caught the public imagination in the late 1990s. Like many clothing retailers it has been squeezed by fast fashion operators like Zara at one end of the market and high end brands at the other. It has also been through a series of failed rebirths.
The company, founded in 1972 a year after the film of the same name, considered selling itself before scrapping the idea in January.