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French Connection Rises Most in Eight Weeks on Profit

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Sept. 15 (Bloomberg) -- French Connection Group Plc, the U.K. retailer that sold the Nicole Farhi brand in July, rose the most in eight weeks after posting a first-half pretax profit.

The retailer’s shares climbed 4.4 percent to 47 pence at the 4:30 p.m. close in London. French Connection reported a pretax profit of 200,000 pounds ($310,000) in the six months ended July 31 after a loss of 5.4 million pounds a year earlier, the London-based company said today in a statement.

“We’ve seen a substantial improvement in the actual operating of the business,” Neil Williams, director of operations at French Connection, said on a conference call. “I assume the market is taking the underlying trading figures well.”

The net loss widened 14 percent to 12.5 million pounds after French Connection discontinued businesses in Japan and Northern Europe and plans to close stores in the U.S. The company recorded an 11.2 million pound loss on discontinued businesses, Williams said.

“These are encouraging results” Freddie George, an analyst at Seymour Pierce wrote in a note to investors today. “Good growth was achieved in menswear, a current focus of the strategy.”

The retailer separately said it had agreed on a licensing agreement with Hong-based Li & Fung Ltd. for the North American market, with apparel to be sold at stores of Sears Holdings Corp. The business will provide at least 1.5 million pounds in additional licensing income in the year ending Jan. 31, 2012, French Connection said.

‘Significant Turnaround’

French Connection had recorded a “significant turnaround” in business performance, although there is a “long way to go,” Williams said. Revenue rose 4.1 percent to 96.2 million pounds from a year earlier.

The retail environment probably won’t improve in the second half of the year as same store sales dropped in the early weeks of the new season, the company said. Wholesale forward orders are better than at the same time last year, and French Connection expects to maintain “strong margins,” it added.

French Connection closed its businesses in Japan and northern Europe prior to the start of the period and 15 stores will be closed in the U.S., the retailer said.

The cash balance at the end of the period was 30.2 million pounds, up 6.5 million pounds from a year earlier. French Connection said it will pay a 0.5 pence per share dividend for the period.

To contact the reporter on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net.

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