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French Connection Loss Narrows After Shutting Weak Outlets

French Connection Group Plc, the U.K. retailer that sold the Nicole Farhi brand last year, posted a narrowed full-year loss as it closed weak outlets and sold more merchandise at full price.

The net loss was 2.3 million pounds ($3.7 million), or a loss of 2.4 pence per share, compared with a loss of 24.9 million pounds, or 26 pence, a year earlier, the London-based company said in a statement today. The Nicole Farhi sale generated a loss of 5.7 million pounds, French Connection said.

French Connection closed money-losing or marginally profitable stores in the U.S. and Japan, in favor of licensing agreements, including one with Hong Kong’s Li & Fung Ltd. in shops such as those of Sears Holding Corp. French Connection’s shares have tripled since it sold the unprofitable Nicole Farhi fashion label in July.

“The restructure of French Connection has enabled the company to focus back on its core brand and markets and rid itself of profit-depleting businesses,” Maureen Hinton, practice leader at London-based Verdict Research, said in a e-mailed statement. “It has also enhanced the brand’s fashion authority, which it had lost somewhat over recent years.”

French Connection rose 4.25 pence, or 3.6 percent, to 124 pence in London, giving the company a market value of 118.9 million pounds.

Clothing Lines

The company is benefiting from strong product lines, allowing it to sell more items at full price, Neil Williams, director of operations, said in a telephone interview.

“We’ve seen a significant move away from clearing stock,” he said. The company expects to increase sales at full price again this year, he said. “It’s on the strength of the range, men’s wear and women’s wear.”

French Connection expects to open franchised outlets in Russia, Hungary, India, Hong Kong and China over coming months, he said.

Gross margin improved 50 basis points to 52 percent last year, yet was weaker in the second half, due to price rises in cotton and other raw materials, the company said.

French Connection raised its prices by 8 percent for its 2011 spring collection, and expects another 8 percent increase for the winter, Williams said.

“We continue to see inflationary pressures,” he said.

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