Fashion founder's faux pas

PERHAPS Stephen Marks should divorce more often. The timing of the French Connection founder-chairman's share sale on June 29 to raise £36.5m to fund the settlement with his estranged wife Alisa was exquisite.

Marks placed some 9m shares when the price was 430p, against the market price of 329 1/4p in latest trading. If he had sold now Marks would have collected £7.2m less.

The company's shares have been hammered by a shock 9.5% like-for-like sales decline at its crass FCUK brand over the last six months.

Despite Drapers Record, the retail industry bible, condemning the FCUK brand as 'tired and tacky', Marks shows no sign of retreat. He insists that FCUK will continue to be 'an important part of our branding and we will carry on using it on our products, in our stores and in our advertising'.

No doubt Marks is convinced that there is still more life in FCUK, which has given French Connection boundless free publicity-But British consumers, often regarded as at the cutting edge when it comes to fashion, clearly think differently.

Even Marks acknowledges that it is a brighter outlook for the rest of the group, the wholesale divisions and operations in North America and Asia, which are holding up earnings.

Like many entrepreneurs, Marks still thinks he can run the company as a fiefdom. But he must recognise that with his June share sale his ownership shrank from 51% to 42%.

The new situation brings with it obligations including a need to communicate better with all shareholders, not to conduct selective briefings and to conform to the best standards in corporate governance.

The lack of checks and balances on the French Connection board is good reason to treat the company gingerly.

THE decision by contractor Jarvis to pay out up to £1m in bonuses to the directors suspended at the time of the Potters Bar crash is disgraceful. It is a terrible insult to the families of those killed or maimed in the accident 18 months ago.

It also shows the disgraceful corporate and social governance of Jarvis. Shareholders will be shocked enough when they see the accounts. The auditors Ernst & Young have heavily qualified the report, questioning whether the company can survive in its present form.

Yet despite this the board, now headed by Tory politician Steve Norris, has signed off bonus payments that cannot be justified on either business or ethical grounds. Norris is collecting a fee of £77,000 against £40,000 last year despite the group's dire finances.

In drawing up the remuneration report the company has done its damnedest to make sure that the payments to former directors are hidden in the footnotes to the accounts.

Investors in Jarvis who have watched the company decline into near insolvency should not tolerate any of this. They should insist that the sums involved be returned to the company forthwith.

The cash should then be placed in an escrow account for the victims of Potters Bar. Anything less would be a travesty.

Rate rises checked

BY acting pre-emptively to raise interest rates the Bank of England may well have ensured that they will not have to rise as far as the markets have been expecting. The latest consumer price index fell from 1.4% to 1.3% despite fears that it would climb on the back of higher petrol prices.

The main downward pressure is coming from the clothing sector where prices have fallen by 5.7%, bringing them to their lowest level since December 2002. Petrol prices also fell in the first part of August, although that may be reversed in the coming months.

In the end the key to the trend in British interest rates will still be housing. Monetary Policy Committee member Steve Nickell argues convincingly that the Bank must monitor house prices because they have a direct impact on household spending and inflation. He believes that the recent moderation in prices seen in surveys could be the start of something bigger.

In a speech at Bloomberg, Nickell noted that house prices are six times average earnings. Nickell estimates that this ratio would have to fall by 32% to hit the average level since 1982. But he acknowledged that there are reasons to believe that the correct ratio may have changed because of housing shortages, lower mortgage repayments and a fall on long-term interest rates.

With house prices starting to wobble the betting must be that at 4.75% British interest rates are starting to approach their peak. They may yet rise to 5% by yearend, but predictions of 5.5% by midway through 2005 are looking less credible.