New Look fashion chain slumps to massive annual loss


The struggling New Look fashion chain has plunged to a huge annual loss of nearly £235m after a tumultuous year, which included the return of its former boss Alistair McGeorge to attempt a second turnaround of the heavily indebted chain.

“There was no way I could stop these numbers happening, it was preordained by the time I joined,” McGeorge said.

He blamed the dire performance – including a near 20% plunge in website sales – on the previous management team chasing a “young and edgy” audience. “We lost connection with our core customers and got our stock packages wrong,” McGeorge said.

The grim New Look results contrasted sharply with rocketing sales at its online rival Boohoo and provided new evidence of the gulf between the physical and digital high street.

Overall sales at UK New Look stores open for more than a year slumped nearly 12% in the year to 24 March. Total turnover fell by £107m to £1.3bn.

The chain is owned by Brait, a private-equity firm whose biggest shareholder is the South African tycoon Christo Wiese. Brait paid £780m for a majority stake in New Look in 2015 and the retailer is now saddled with a £1.2bn debt pile.

In March New Look launched a company voluntary arrangement (CVA), a form of insolvency used to jettison unwanted stores. Under the restructuring plan up to 60 of New Look’s 593 stores were expected to close while the rent on nearly 400 other branches was cut, shaving £40m off its annual rent bill.

January

Jamie’s Italian says it will close 12 of its 37 UK branches as part of a rescue deal with its creditors

Tesco puts up to 1,700 jobs at risk in a management shake-up

Marks & Spencer announces it is is closing its London distribution centre, putting 380 jobs at risk

Sainsbury’s says it will strip out thousands of management jobs from its stores

Byron says it will close up to 20 sites as part of a rescue plan

East fashion chain closes its 50 stores and 314 staff lose their jobs after it is unable to find a buyer

February

Morrisons says it will axe 1,500 middle-management roles in stores as part of plans to cut costs

Debenhams announces it will cut 320 jobs across the UK – one in four of its store managers

Warren Evans goes into administration, putting 287 jobs at risk

Jamie Oliver’s Barbecoa restaurants go into administration, with 80 staff losing jobs

Toys R Us  goes into administration, putting 3,000 jobs at risk

Maplin also collapses, threatening 2,500 jobs

March

New Look says it is considering closing as many as 60 stores, putting up to 980 jobs at risk

Prezzo announces it will close 94 restaurants with loss of about 500 jobs

April

Littlewoods owner Shop Direct says it will close three warehouses in Greater Manchester, putting nearly 2,000 jobs at risk

Carpetright confirms plans to close 92 stores, with the potential loss of 300 jobs

May

Jacques Vert and Windsmoor owner Calvetron Brands goes into administration, putting 1,000 jobs at risk

Tesco Direct clothing and homewares website to close, putting 500 jobs at risk

Marks & Spencer reveals plans to close a total of 100 shops by 2022, putting more than 1,500 jobs at risk

Carphone Warehouse says it will shut 92 stores amid a profits warning

Carluccio’s unveils plan to shut 34 restaurants, putting 500 jobs at risk

June

Mothercare says it is to close about 50 of its 137 stores by June next year with the potential loss of about 800 jobs

House of Fraser announces the closure of 31 of its 59 department stores, putting up to 6,000 jobs at risk

Poundworld falls into administration, putting more than 5,000 jobs at risk


Photograph: Matthew Horwood/Getty Images Europe

However McGeorge said he did not expect any stores to shut this year after all because, as a result of the wave of other CVAs from retailers including House of Fraser and Mothercare, landlords were increasingly reluctant to take back the keys and cover the running costs on empty units themselves.

As a result, New Look may end up occupying stores rent free. “We are not in any rush to shut them if it is in our gift,” McGeorge said.

Many retailers with large estates are struggling to absorb big increases in business rates as well as as higher labour costs as a result of the national minimum wage and apprenticeship levy.

At the same time, Britons are cutting back spending on clothing and household goods because of a squeeze on spare cash. In the latest sign of the distress caused by this cocktail discount chain Poundworld crashed into administration on Monday, putting more than 5,000 jobs at risk.

Boohoo, owner of the fast-growing PrettyLittleThing and Nasty Gal brands, is winning sales from traditional high street retailers by targeting a generation that shops via their mobiles and takes its style cues from Instagram.

Group sales were up 52% to £183.6m in the three months to 31 May but the star performers were PrettyLittleThing and Nasty Gal, where sales had more than doubled in the period.

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Boohoo shares were down 2% at 215p at lunchtime on Tuesday; two years ago they were changing hands at 58p.

The House of Fraser CVA, which involves the proposed closure of 31 of its 59 stores, is proving controversial with landlords who are angry they being asked to take a hit while other creditors are unaffected.

“A CVA will not save a poor brand,” said McGeorge. “For us it dealt with our over-rented position and stopped us running out of money. Landlords would have come out of an administration in a much worse position.”



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