October 13, 2021

French Connection Sold for £29m After Years of Losses

French Connection's founder Stephen Marks has run the company for years despite enduring serious struggles regarding profitability and store real estate costs. The company closed dozens of stores in an attempt to claw its way out of declining sales numbers and increasing costs, but its recovery was less than impressive.

French Connection Sells for £29m After Years of Losses: eAskme
French Connection Sells for £29m After Years of Losses: eAskme

Sold to a consortium:

French Connection is a high street brand that is best known for its somewhat provocative FCUK branding, which was extremely popular during the 1990s and 2000s.

The company announced recently that it had accepted a 30p per share offer from a holding company named KJR Brothers Ltd, along with the UK fashion industry entrepreneur duo Amarjit Singh Grewal and Apinder Singh Ghura.

When the bid was first announced in August, it represented a 30% premium to the share price.

Marks, the founder, will remain the top shareholder of French Connection with a stake of 41.5%.

However, he announced that he would step down from his position as company chairman once the sale was completed.

A long time coming:

For those who have been following the developments of the fashion industry, this sale is far from surprising.

It has been reported widely that Marks has been looking for an escape out from the company since at least as early as 2018.

French Connection has been struggling to find its niche in the fashion industry for nearly a decade now, and it is unclear how the store will shift its focus to remain relevant.

French Connection currently has 150 stores worldwide, and it quickly began seeking buyers in 2021 as it struggled to make up for the 40% shortfall in revenue caused by the COVID-19 pandemic.

There were early talks with investment firms such as Spotlight Brands and Gordon Brothers regarding purchasing significant stakes.

Still, the talks fell through reasonably early in the process.

A growing trend?

Last year saw the closure or severe reduction of many different high street companies and led many market analysts to question whether or not the high street is dead.

The pandemic kept shoppers out of stores and brought record lows in turnover to high street brands.

However, the global health crisis did not destroy every company or industry, with many large eCommerce platforms genuinely thriving and growing during the period.

Similarly, entertainment sectors such as video games and online gambling increased in popularity precisely because of their digital appeal – users could enjoy them from the comfort and safety of their own homes.

There are now hundreds of online casinos for users to choose from, and the industry is growing more competitive every day.

However, for the high street brands that could not digitize fast enough, the pandemic was the last in a long line of losses.

Companies such as Top Shop – and all of the Arcadia Group companies – Forever 21, Payless Shoes, BCBG, Abercrombie & Fitch, Chico's FAS, Eddie Bauer, Gap, Guess, Ross Stores, JCPenney, J.Crew, and Loft, among many others, hastily declined and are arguably now 'on life support.

The legacy of Stephen Marks:

French Connection's gradual (and then not-so-gradual) decline has likely been the hardest for the company's founder.

Born in the UK, Marks spent his entire life in the fashion industry and worked under fashion giants such as Louis Féraud and Miss Selfridge.

Marks launched the French Connection label in 1972.

The name was reportedly inspired by a deal he had made with a business contact in France to procure 3,000 cheesecloth shirts from India that he could resell at a significant markup.

The company quickly skyrocketed in popularity, and Marks listed the company on the London Stock Exchange in 1984, becoming the 15th wealthiest man in the UK as a result.

However, by the late 1980s, the brand faced financial difficulties and failed to catch on.

Marks took over directorial control of the company and launched the FCUK advertising campaign, which proved immensely successful.

At its height, French Connection stores were operational in 30 countries.

The importance of digital technology in fashion:

Alongside the pandemic, part of the reason why these brands are dying is that the concept of the shopping mall itself is languishing.

Rather than listlessly drifting around air-conditioned malls, many shoppers are instead choosing to shop online and browse through dozens – if not hundreds – of listings before they find the perfect product.

Online shopping allows users to compare hundreds of different products for price, quality simultaneously and increasingly for ethical considerations such as whether or not the products were made in an environmentally friendly fashion or made using fair labour practices.

Fast-fashion mega-sites such as ASOS, PrettyLittleThing, boohoo and Missguided all have hundreds of thousands of different products for users to try, along with convenient shipping policies.

Looking to the future of shopping:

While the future might not be exceptionally bright for French Connection and similarly positioned companies, there is still a place in this world for high street stores.

Companies that want to survive in this day and age realize that they have to be creative and fearlessly innovative to stay relevant and exciting in the industry.

Companies hoping to remain alive have started to turn shopping in-store into an experience through offering services and products such as coffee stands, manicure stalls and makeup styling events.

Successful high street brands are also starting to invest more heavily in their digital strategies and eCommerce platforms.

While it is still too early to know which strategies will ultimately pay off in the long run, what is certain is that companies need to be more creative and digitally focused than ever before.

If you still have any question, feel free to ask me via comments.

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