Tough road for New Look

Following a robust few years of market outperformance and share gains, the start of New Look’s 2016-17 financial year is a major disappointment.

While weakened consumer confidence and unseasonal weather dampened shopper appetite to spend on clothing & footwear, New Look has underperformed the market and lost share over the period.

Despite a 35.5 per cent fall in underlying operating profit to £30.5 million, the retailer has continued to invest in its strategic growth areas, namely menswear and China. Menswear sales growth of 21 per cent dramatically outperformed following further rollout of the men’s standalone format. Moreover, as it builds a bigger customer following New Look is able to improve its menswear proposition via insight gained on most browsed and shopped styles and customer feedback – ensuring its collection is continually enhanced and better targeted to its core audience.

While New Look has the opportunity to grow its share of the UK menswear market organically, given that it is a less saturated and outperforming segment of the clothing market, it should also be targeting share from rivals such as River Island, Burton, Blue Inc and Topman.

Verdict forecasts a more challenging couple of years for the clothing market than what we had forecast back in January. While Brexit will impact spend across the home sectors more so than in clothing, the likelihood of squeezed disposable incomes, rising food & grocery prices and price inflation in clothing will restrict consumer’s ability to purchase higher volumes of discretionary clothing purchases.

Retailers will therefore have to work that much harder to stimulate spend. However, New Look’s value positioning and go-to appeal for both essentials and fashion will put it at an advantage over some of its mid-market competitors.

• Honor Strachan, lead analyst at Verdict Retail.