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British fashion retailer French Connection FCCN, +1.32% has warned it could run out of cash in “the coming months” unless it secures additional funding or sales start to improve.
The London-listed company plans to reopen stores on Jun. 1 but said it did not expect a return to normal levels of trade “for some time,” despite seeing a small increase in activity in Europe as countries emerge from lockdown.
French Connection said discussions had begun with a number of potential funding partners and the board was confident of raising sufficient funds to support the business until trading levels picked up. But it warned that “without securing additional funding and should the current Covid-19 impacted trading levels continue, the company’s cash resources will eventually be eroded in the coming months.”
The stock rose 1.3% on Tuesday but has fallen 84% year-to-date.
The retailer, whose stores and concessions have been closed since March, said it had seen a “significant reduction” in sales as a result of the pandemic. It added that many of its U.S. wholesale customers had delayed payments for stock, compounding its problems.
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Online sales from its own websites in the U.K. and the U.S. are up 44% over the past six weeks and it has continued to supply some wholesale customers. However, the company said that made up only a small proportion of the overall business.
French Connection said it has taken a number of steps to save cash and reduce costs, including talks with landlords over rent holidays, rescheduling tax payments, and asking suppliers for discounts. It has made use of the U.K. government’s job retention scheme and business rates relief but said it has been unable to access other government support schemes due to “tight qualification constraints.”
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The retailer, previously known for its controversial FCUK branding, has not reported a pretax profit since the year ending January 2012, according to FactSet data, and sales have fallen in six of the past seven years. In the year to Jan. 31 2020, sales fell 11.4% to £120 million with a pretax loss of £7.4 million.
The company had a net cash position of £8.1 million as of Jan. 31, according to preliminary full-year results, down from £16.2 million the previous year.
