French Connection Group plc

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French Connection Group plc

60 Great Portland Street
London WIN 5AJ
United Kingdom
Telephone: (44)20 7399 7200
Fax: (44)20 7399 7201
Web site: http://www.frenchconnection.com

Public Company
Incorporated: 1969 as Mark Stephens London Ltd.
Employees: 1,718
Sales: £193.6 million ($309.76 million)(2001)
Stock Exchanges: London
Ticker Symbol: FCCN
NAIC: 422330 Women’s, Children’s, and Infants’ Clothing and Accessories Wholesalers; 448150 Clothing Accessories Stores

French Connection Group plc is a leading retailer and wholesaler of its own in-house clothing and accessories designs. Led by its founder, Stephen Marks, French Connection has made waves—and profits—with its controversial advertising campaigns built on its French Connection U.K. acronym. The company backs the edginess of its advertising with trendy and trendsetting high-end clothing designs, and since the late 1990s has extended placed its brand name on products ranging from grooming products created by Boots to watches by Timex. French Connection is the holding company for two strong brands—the youth-oriented FCUK and the high-end Nicole Farhi brand, targeting an older, more affluent, yet still fashion-conscious market. Both FCUK and Nicole Farhi are supported by company-owned retail networks, totaling some 100 stores in the United Kingdom, the United States, and Canada. The company also manages a wider franchise and concessions network bringing its fashions into more than 1,500 venues worldwide. At the beginning of the new century, French Connection has targeted especially the North American and Japanese markets for future growth. The company acquired full control of its U.S.-based joint venture, the Best of All Clothing (BOAC), in 2001 and had already established some 20 retail shops in that country, including a new flagship stores in San Francisco. French Connection expected to open as many as 300 retail stores in the United States in the early years of the new century. The company is also joining with a Japanese partner to expand into the Japanese market and opened a flagship store in Tokyo in 2001. Back home, the company unveiled its largest store, on London’s Oxford Street, featuring 14,000 square feet of selling space. Wholesale accounts for slightly more than half of the company’s £193 million in 2001 revenue. The company has been traded on the London Stock Exchange since 1986.

Hairdresser’s Son to Hotpants King in the 1970s

Stephen Marks grew up in the Harrow area of north London, helping out his father in his hairdresser’s shop and leaving school at the age of 16. Marks’s initial interest was in playing tennis—in 1964, at the age of 18, he won the junior’s title at Wimbledon. Tennis back then was still an amateur sport, however, and Marks looked about for ways to earn a living. Having seen how hard his father had to work, Marks sought a different career direction. As Marks told the Independent: “My father used to leave home at 6:30 a.m. and get back at 9 p.m., 11 p.m. on Saturdays,” earning “enough to give us a comfortable life, but not that comfortable.”

Marks went to work for a clothing manufacturer run by a family friend. There, as Marks told the Guardian, “they gave me the most wonderful training, although I didn’t realise it at the time, learning about everything from cloth buying to designing.” Toward the end of the 1960s, Marks left the coat manufacturer for clothing designer and manufacturer Louis Feraud. Marks was behind the successful launch of the company’s Miss Feraud label. That success led Feraud’s management to offer Marks a position as a director of the company. Marks described the appointment to the Guardian: “I asked if that meant I got a share of the company and they said: ’No, you just get called a director.’ That made me very depressed, because I wanted to get on in life. I didn’t care what 1 was called.”

A friend came to the aid of the depressed Marks, suggesting that he go into business for himself and promised financial backing for Marks’s new venture. In 1969, Marks struck out on his own, establishing Stephen Marks London Ltd. with just £17,000. The clothing was designed by Marks, who was joined in the business by a pattern cutter and an accountant. Marks described his own role in the new company to the Independent on Sunday as that of “a salesman who ’had a sense of what was right and what was wrong,’ who used to ’botch a collection together and sell it.” Marks quickly displayed a flair for fashion—or at least a commercially successful fashion trend. On a trip to Paris, he discovered the newest French fashion phenomenon, hotpants. “I came back to London, had some run up and showed them to a buyer at Miss Selfridge,” Marks told the Guardian, “She took 36 pairs and sold them all in a day. She came back for 2,000 pairs, and I became the Hotpants King.” By the end of its first year, the company had posted sales of £180,000.

Marks launched his own label, designing a line of suits and coats, although he was to become especially known for his youth-oriented fashions. By 1972, Marks’s designs were generating £700,000 in revenues. In that year, Marks traveled to Hong Kong. “Once I saw Hong Kong I realised the potential of the Far East,” Marks told the Guardian, It was like a shining light in terms of price and quality. And so French Connection was born.”

Marks then entered the retail arena, opening a furniture and clothing shop, called Cane, then a second store, also in London, called Friends. The French Connection brand name came in the 1970s as Marks contracted to sell his designs through the Top Shop retail chain. Joining Marks was a freelance designer, Nicole Farhi, who became his companion and mother of his first child—and then the company’s chief designer. “She was always criticizing my designs and saying she could do better. So in the end I said ’bloody get on with it then,’ and she did,” Marks told the Guardian. Farhi not only handled the youth-oriented designs for the French Connection label, she also began to produce designs under her own name for an older, wealthier women’s market.

French Connection soon became the company’s retail store brand, as Marks began to open new stores in London and then throughout the United Kingdom. The Nicole Farhi brand was also transformed into its own retail format, yet French Connection remained the company’s flagship brand. In 1984, the company turned toward the United States, partnering with American Michael Axelrod in a 50-50 joint venture Best of All Clothes (BOAC). The joint venture’s role leaned especially toward wholesale sales of the French Connection brand, rather than a retail expansion of the company’s store format. Two years later, as French Connection prepared to boost its expansion in the United Kingdom, the company listed on the London Stock Exchange.

Controversial Success for the New Century

At the end of the decade, however, French Connection appeared to be on the brink of disaster. The company had been caught up short by the beginning of a new recession that affected not only the United Kingdom, but also the company’s growing activities in the United States. Despite holding two-thirds of the company’s shares, Marks resigned from the CEO chair in 1989, a position taken up by Michael Shen. By then too, Marks’s personal relationship with Farhi had ended, although they remained business partners. Threatened with the loss of his majority share and in order to rescue the company of he had founded from collapse, Marks lent French Connection more than £3.5 million.

Arguments with Shen led Marks to take back the CEO position in 1991. Marks set to work rebuilding the company, bringing it back into renewed profit growth by mid-decade. Marks’s personal fortunes also received a boost, when Hard Rock Café, in which he had been one of the original financial backers and retained the second-largest holding of shares, was sold to the Rank Organization, allowing Marks to pocket a strong share of the £300 million purchase price. By 1996, his company’s operations were also growing, now reaching 30 retail stores in the United Kingdom—primarily under the French Connection name, but also under the Nicole Farhi signage—and 11 stores in the United States. That year the company was also able to pay out its first stock dividends since 1991. Yet the company’s strongest expansion was still ahead.

Until the mid-1990s, French Connection had operated more or less without an advertising budget. In 1997, the company turned to the then independent Trevor Beattie (who was shortly to form his own TBWA advertising agency) for assistance. Beattie quickly spotted opportunity in the company’s own name. French Connection’s United Kingdom office had long been addressing its correspondence with its Hong Kong office using the acronyms from FCUK to FCHK. The FCUK acronym had also been used in the company’s stores. But Beattie took the acronym and turned it into a U.K. sensation.

After an initial series of deliberately provocative ads, featuring models wearing “fcuk fashion,” the company rolled out a new and more playful billboard and press campaign, playing on the garbled appeal of the FCUK logo with such taglines as “I you want,” and “night all long.” Complaints from, among others, the Church of England (for the company’s “fcuk Christmas” campaign), brought the company under investigation from the U.K.’s Advertising Standards Association.

The controversy surrounding French Connections new advertising campaign helped put the company into high gear. Backed by a string of strong clothing designs, French Connection’s sales took off, reaching £83 million in 1997 and topping £117 million by 1999. The company quickly added new stores, boosting its total number of French Connection and Nicole Farhi stores to more than 100 by the end of the decade. The company’s wholesale arm was also performing strongly, adding a number of foreign concessions in countries such as Australia, Holland, the Scandinavian market, Singapore and Hong Kong, and Saudi Arabia and Dubai.

Company Perspectives:

Whether it shocks you or amuses you, fcuk certainly makes you think.

Until then, French Connection had built a strong, albeit niche, position in the United States. The success of the FCUK campaign gave the company a new base from which to attack the U.S. market—traditionally resistant to foreign retailers. By the end of 2000, the company’s expansion in the United States led it to forecast growing to as many as 300 retail stores in that country—with immediate plans to expand to nearly 60 stores there by 2004. To consolidate its growth in the United States, the company acquired the 50 percent of the BOAC joint venture it did not own in 2001. As Stephen Marks told the press, “Acquiring 100 percent ownership of our US business is an important milestone for our global brand strategy. We believe that complete ownership will enable us to maximise French Connection’s potential as it enters the next stage of its development in the US.”

Meanwhile, French Connection had for some time been eyeing the Japanese market. In 2001, the company opened its first store in that market in Tokyo, teaming up with a local partner, D’Urban, Inc., for a three-year partnership. The company expected to open up two more Japanese stores before the end of the year and use that country as a springboard for expansion throughout the Far East.

French Connection made no secret of its plans to develop into a globally operating retailer, raising its French Connection and Nicole Farhi brands to true international status. The company’s advertisements continued to draw criticism and complaints—and customers. By the end of its 2001 fiscal year, the company’s sales had topped £193 million. In early 2001, the company was delighted to discover that its latest campaign, dubbed ’fcukinkybugger’ had been banned from the British national television—the company immediately launched a web site featuring the full-length advertisement. The hundreds of thousands of teenagers sporting the company’s “FCUK ME” tee shirts gave Mark Stephens and French Connection a strong base on which to bet its future growth.

Principal Subsidiaries

French Connection Retail Ltd.; French Connection Ltd.; NF Restaurants Ltd.; French Connection (Hong Kong)Ltd.; Toast (Mail Order)Ltd. (75%); Stephen Marks (London)Ltd.; French Connection 2000 Sari (France); French Connection No.2 Pour Hommes Sari (France); French Connection (Canada)Ltd. (75%); Stephen Marks (New York)Inc.; Nicoles Café LLC (U.S.); PreTex Textilhandels GmbH (Germany); Best of All Clothing Ltd. (U.S.); BOAC Ltd. (U.S.); Lousiana Connection Ltd. (U.S.; 50%); Roosevelt Connection Ltd. (U.S.; 50%); Soho Connection Ltd. (U.S.; 50%); Westwood Connection Ltd. (U.S.; 50%).

Principal Competitors

Abercrombie & Fitch Company; Arcadia Group pic; Benetton Group S.p.A.; Diesel SpA; Esprit Holdings Limited; Guess?, Inc.; H&M Hennés & Mauritz AB; Hot Topic, Inc.; Marks and Spencer pic; New Look Group pic; NEXT pic; The Gap, Inc.

Key Dates:

1969:: Mark Stephens launches Mark Stephens London Ltd.
1972:: Stephens opens his first retail store.
1984:: The company launches the French Connection label in the United States through joint venture with Best of all Clothing (BOAC).
1986:: The company is listed on the London Stock Exchange.
1989:: Mark Stephens gives up the position of CEO.
1991:: Mark Stephens becomes the CEO again.
1997:: The company launches the of first FCUK campaign.
2000:: The company signs a partnership agreement with D’Urban Inc. in Japan.
2001:: The company acquires 100 percent of BOAC and opens the first store in Tokyo.