Last week, UK fashion brand French Connection was forced to announce that it had received approaches from two interested parties to acquire the brand after a significant increase in its share price. The stock movement had been so unusual for the perennially underperforming business, that Mike Ashley’s Frasers Group decided to offload its 25 per cent stake and cut its losses. Some might be surprised that French Connection is around at all. Its overall sales, including wholesale, have fallen by
by 27 per cent over the last five years, while revenues through its own retail network have halved to just £46.7 million over the same period. Worse yet, it has failed to generate a profit over the last eight years. Why would there be any interest in acquiring the brand at all? Controversial branding French Connection is the brainchild of Stephen Marks, who remains in charge as chairman and chief executive and holds a 42 per cent stake. It had been a fairly unremarkable brand until the early 1980s when French designer Nicole Farhi came on board, subsequently launching her own higher-end label within the group (which was sold off in 2010). French Connection appeared to have struck gold when it caused widespread controversy around the start of the millennium by adopting the risqué FCUK branding. It soon became famous for tshirts emblazoned with slogans such as “born to fcuk” and umbrellas that stated “fcuk rain”. If this had happened in the age of social media and memes, the sky could have been limit. But as it was, interest in the FCUK branding fizzled out around the mid-2000s. FCUK casts a long shadow For the past 15 years, French Connection has tried and failed to recapture the magic of its heyday. At first it could be argued that it hung onto the FCUK brand for too long, thus drawing attention to the fact that it had failed to find a catchy replacement. Then French Connection turned its back on the brand and looked to re-establish its design credentials. However, the problem was that it was competing in a similar market as brands such as Ted Baker, but with much higher price points. In 2016, French Connection announced the return of FCUK – perhaps in desperation as sales continued to dwindle and losses started to mount. Analysts approved of the move because it couldn’t possibly be any worse than the performance of the core French Connection collection and there was also a 1990s revival that could be latched on to. Problems exacerbated by pandemic It is safe to say that the return of the FCUK brand has not led to a reversal in French Connection’s fortunes. Its woes have been made worse by the pandemic, with its UK stores having been closed for a lengthy period, causing sales to plummet by 53 per cent in the first half of 2020. While the group had been thrown a £15 million lifeline from restructuring specialist Hilco in July, it is clear that it must find a buyer if it is to survive. It had been thought that French Connection would eventually become part of Sports Direct (now Frasers Group), when it started building up a strategic stake in the business from 2017. For once, Mike Ashley wisely showed some restraint and did not go the whole hog. Frasers Group has now sold its 25 per cent stake to Newcastle-based businessman Apinder Singh Ghura, who will have a big say in any potential acquisition – alongside Stephen Marks. Why are investors interested? So which two buyers are in line to acquire French Connection? The first is Spotlight Brands, the investor behind British fashion players such as fitness brand Sweaty Betty, backed by investment firm Gordon Brothers, which previously acquired the Laura Ashley brand following its collapse. The second interested party is brand investment platform Go Global Retail. Following last week’s surge in French Connection’s share price, its market capitalisation stands at just under £25 million. At that price, it could be worth a punt for an investor. What comes to mind is perhaps a similar motivation as the acquisitions of the various Arcadia brands, such as Topshop and Dorothy Perkins by Asos and Boohoo in recent weeks – which were predominately focused on their intellectual property and websites. There will be some value in French Connection’s website and its wholesale operations, with the latter used to supply concessions in international markets such as Australia. Likewise, there must also be some money to be made with the FCUK brand – if only for novelty purposes or perhaps in anticipation of the next 1990s revival. However, it seems a foregone conclusion that the French Connection stores will close, particularly in the current climate. Even retaining a global flagship store in London would seem a stretch for brand that just does not resonate anymore with today’s fashion shoppers.