New Look has reported a 19% increase in underlying operating profit for Q1

New Look has reported a 19% increase in underlying operating profit for Q1

Struggling UK fashion retailer New Look has hailed "encouraging green shoots" in the performance of its womenswear business during the first quarter, and says it made good progress in stabilising profits during the period following a difficult year. 

For the 13 weeks ended 23 June, the company reported an underlying operating profit of GBP14.4m (US$18.7m), up 19% from GBP12.1m in the prior year.

But revenue slipped 2.7% to GBP329.4m from GBP338.7m last year, while New Look brand like-for-like sales fell 4%.

The retailer is in the midst of a turnaround strategy, with a company voluntary arrangement (CVA) approved in March that means 60 stores are due to close and rent reductions have been negotiated on most of its remaining stores.

In its first-quarter trading update release today (7 August), New Look claims to have "returned to proven broad appeal product," with women's clothing in UK stores outperforming the market by 7.4 percentage points according to the British Retail Consortium.

Ecommerce has helped, with a "substantial" increase in profitability, while Click and Collect sales mix increased to 40% from 27% last year, driving footfall into stores.

In addition, the company has "over-achieved" GBP70m of annualised cost savings in the quarter, with additional savings targeted.

"We previously said that our focus is to achieve financial and operational stability. In Q1 we made good progress in stabilising profits and delivering on our cost savings plan, with encouraging green shoots seen in womenswear," said executive chairman Alistair McGeorge.

"We ended the quarter with a clean stock position and have seen improved sales performance in the areas we have addressed so far in our product review. We are confident there is more to come as we focus on our remaining product ranges.

"As we recover the broad appeal of our product, we were pleased to improve our market performance and deliver better customer conversion rates. This shows the strength and resilience of our brand, and the positive impact of the changes we are making.

"Our turnaround plans continue, and we will deliver further operational efficiencies whilst maintaining our resolute focus on our core strengths and heartland customer to ensure we remain on the right track."

Mamequa Boafo, Senior Retail Analyst at GlobalData, notes the trading update marks yet another disappointing quarter for New Look, with one of the main concerns is its inability to compete in the highly competitive youth fashion sector given the pressure from the likes of Asos, and Primark.

Despite highlighting improved sales in revamped clothing ranges and an "encouraging" Click and Collect performance, Boafo says New Look has been unable to convert this into positive revenues.

"While profit recovery has been achieved the real test now is whether New Look can regain shopper loyalty given the growing choice available to shoppers. While New Look has made some progress in driving product appeal through an enhanced product offer there are still improvements to be made. New Look will need to showcase its fashion credentials through its autumn/winter ranges and regain traction on its menswear offer, as the retailer needs more than fleeting footfall drivers to counteract further declines in market share."