Struggling fashion chain French Connection has confirmed it may be up for sale, following reports that the company’s founder wants to sell his 42% stake.
Stephen Marks, the chairman and chief executive, is looking to offload his holding, nearly half a century after creating the fashion brand.
French Connection said in a statement it was “reviewing all strategic options in order to deliver maximum value for its shareholders, which includes the potential sale of the company”.
The shares jumped by more than 30% to 56p in early trading, giving the company a market value of £52m – far below the £500m it was worth in its heyday.
Mike Ashley’s sports chain, Sports Direct, is the other big shareholder. It bought out activist investors in July and increased its stake from 11% to 27%, taking it close to the 30% level at which it must launch a takeover bid.
Marks, who founded French Connection in 1972 and named it after the film starring Gene Hackman, has come under mounting pressure from investors to relinquish control of the business after years of losses. His dual role has been heavily criticised and the company responded by appointing two new independent directors last year.
French Connection shot to prominence with its notorious FCUK T-shirt slogan in the 1990s. The eyebrow-raising logo was brought back in 2016 but failed to revive the fashion brand. The firm has struggled to keep up with rivals such as Asos, Next and Zara.
The company, which also owns the brands Great Plains and YMC and recently sold Toast, last month reported a big increase in half-year losses and further store closures. It blamed tough conditions on the high street and provisions for bad debts partly related to the collapse of House of Fraser, in whose stores French Connection has concessions.
Faced with the decline of the British high street, French Connection has been shifting its business towards wholesale and started closing shops five years ago. It aims to have only 30 in the UK and Europe by the end of January 2019, less than half the total it had in 2013. The firm supplies department stores in the US such as Bloomingdales and Nordstrom, as well as the online arms of UK and European retailers.
Russ Mould, the investment director at stockbroker AJ Bell, said: “A potential buyer would have to have to look at the company’s leases and create a plan to streamline the estate of physical stores. It could seek to do more licensing deals as this is proving to be a resilient part of the business, so why not focus more attention here to accelerate growth? And there could be opportunities to make the wholesale business even larger.
“There could even be an opportunity to capitalise on French Connection’s brand awareness and revitalise the brand strength which it previously enjoyed in the 1990s.”
