Learning from Lauren
Celebrity insights into French Connection
I was brushed by celebrity on Thursday, but I've calmed down now. The catalyst was a blog I'd written on French Connection and whether its recent difficulties making a profit are because the high street is unfashionable or its clothes are (or indeed, both).
We know the high street is unfashionable, with increasing numbers of people preferring to shop out of town and out of body (i.e. on the Internet) and I proposed using What I Wore Today, a site that allows people to show off what they're wearing and where they bought it, as a means of gauging the French Connection Brand.
The result was inconclusive, although longer term monitoring of What I Wore Today might yield some interesting results. But arch-networker and financial anlayst Steve Baines tweeted:
Impressed to see @RichardBeddard is using @PoppyD's @WIWT for investment research: http://t.co/jn45lkC3
I think sourcing information from non-financial market sources is one of the key ways of generating superior investment returns over time.
Which is an interesting perspective, I think it might be important, but the cold hard numbers are more important.
@PoppyD is Poppy Dinsey, who founded the site. and Lauren Laverne is the radio 6 Music DJ who introduced me to Poppy Dinsey on her morning show, one of only two radio broadcasts I listen to regularly, the other being Today.
So imagine my delight when Poppy and Lauren began tweeting about French Connection. Delight because I could brag to my kids about my new-found celebrity contacts (the eldest gets a surprising amount of satisfaction cadging retweets from celebrities) but also because I'd expended my pool of research to somebody at the heart of high street fashion and somebody closely connected to the celebrity culture that often drives it. This is what they said:
PD: Interesting piece by @richardbeddard. I think French Connection is one of the few brands I've never owned/worn http://blog.iii.co.uk/kicking-french-connections-tyres/
PD: @RichardBeddard Really interesting. I think "high end high street" really suffers. Nobody wants to spend that much on non-designer
PD: @RichardBeddard People want super fast fashion on the cheap...or high end investment pieces. French Connection sits awkwardly in the middle.
So what have I learned from my brush with fame?
They confirmed what the fashionable, young writers at Moneywise Magazine told me when I first started looking at French Connection years ago. The clothes are quite nice, but they're generally too expensive. They buy them sometimes, when they're on sale.
Poppy Dinsey's observation that high-end high-street really suffers reminds me I tend to lump the whole of the high street together. Companies like Next are doing so well operationally they take what I consider to be risks with their finances, buying back shares rather than saving cash. French Connection is awash with cash, but then, it's struggling to make a profit so arguably the cash is required as a buffer against potential losses and not a luxury investors can take for granted.
Companies like French Connection are doomed to struggle in recessions as their customers shift downmarket but they still have to pay the rent.
As to which is the better long-term investment, it's a tough one. Next has been successful so long, it's seems almost inconceivable it will stumble. French Connection has been struggling so long (though not as long!) it's difficult to conceive of a recovery.
However hard it is to believe these things, that is what the Thrifty 30's holding in French Connection, but not in Next, implies. Next will stumble (more accurately, the risk of Next stumbling, and the extent to which the shares would fall in value if it did, is sufficiently large I don't want to chance an investment), and French Connection will recover, probably.
I've got to explain why, when French Connection publishes its annual report later in the spring.
About the author
Richard is companies editor of Interactive Investor and a columnist at Money Observer magazine. A keen private investor through his Self Invested Personal Pension, he manages two virtual portfolios. The Share Sleuth portfolio is a hand-picked collection of mostly small-cap value shares, while the Nifty Thrifty is a mechanical portfolio designed to pick large, successful companies at cheap prices.
- Richard Beddard on Share Sleuth Digest: Putting the 'c' in "long-term"
- Richard Beddard on Northgate exits Share Sleuth portfolio
- UK Value Investor on Share Sleuth Digest: Putting the 'c' in "long-term"
- Monevator on Northgate exits Share Sleuth portfolio
- Richard Beddard on Share Sleuth Digest: Choosing a strategy that suits
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