New Look to close 60 stores, with 980 jobs at risk
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UK Fashion retailer new Look is to shutter 60 stores – but at least one analyst fears that may not be enough to arrest its sliding performance.
The closures are a core feature of a company voluntary agreement (CVA) proposal to its creditors that will also see rents reduced and the loss of almost 1000 jobs. It has 593 stores in the UK.
Stores slated for closure include its flagships in Oxford Street and some standalone menswear stores, suggesting that strategy failed.
“While the closure of stores will lead to market share loss in the short term, it is a long awaited and necessary move,” commented Charlotte Peace, a retail analyst with GlobalData.
“New Look is now in danger of slipping out of the top 15 UK clothing retailers this year. The retailer’s plan to close just circa 10 per cent of its UK store estate is not enough and New Look must continue to rationalise its remaining oversized store network given it is a huge encumbrance for the retailer.”
Peace said New Look is suffering from “a loss of brand appeal and growing irrelevance among its core UK shopper base”.
“A leaner store estate will improve space productivity, increase profit per store and provide a more consistent brand image, which is much needed for the retailer’s survival,” she said.
Deloitte’s Daniel Butters and Neville Kahn have been appointed as nominees to the CVA.
“Given our challenged trading performance and over-rented UK store estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability,” said New Look executive chairman Alistair McGeorge.
“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal.”
Butters said the retail trading environment in the UK remains extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels.
“New Look is an iconic brand on the high street and the CVA will provide a stable platform upon which management’s turnaround plan can be delivered.”
In the 39 weeks to December 23, New Look reported an underlying operating loss of £5.1 million and a pre-tax loss of £123.5 million after sales slumped 10.7 per cent in the UK..
No stores will be closed ahead of the March 21 deadline for creditor approval of the CVA.
Questions & Answers
Q.What is the purpose of the Company Voluntary Agreement?
What is the purpose of the Company Voluntary Agreement?
The CVA proposal aims to reduce rents and close 60 stores, leading to almost 1,000 job losses. These actions are intended to reduce New Look's fixed costs and restore long-term profitability.
Q.Which specific stores are being closed as part of the plan?
Which specific stores are being closed as part of the plan?
Stores slated for closure include its flagship location in Oxford Street and some standalone menswear stores. This suggests a failure in the menswear strategy and a need to rationalise the network.
Q.Why does an analyst believe these store closures might not be enough?
Why does an analyst believe these store closures might not be enough?
Analyst Charlotte Peace thinks closing only 10 per cent of stores is insufficient, given New Look's oversized network and declining brand appeal. She believes they need to rationalise further to improve space productivity.
Q.What factors are contributing to New Look's challenging trading environment?
What factors are contributing to New Look's challenging trading environment?
Executive chairman Alistair McGeorge cited a challenged trading performance and an over-rented UK store estate. Daniel Butters also highlighted weaker consumer confidence, Brexit implications, and online competition.
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