New Look has announced plans to go into a company voluntary arrangement (CVA) that would see the UK fashion retailer shutter 60 stores and seek to reduce rental costs in a move that could put up to 980 jobs under threat.
In an announcement today (7 March), New Look said it is seeking approval from creditors on a plan to improve the operational performance of the company amid a difficult retail environment and challenged trading performance.
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Under the proposal, New Look has identified 60 out of its total 593 stores in the UK for potential closure – including its two flagship stores on Oxford Street – alongside a further six sites which are sub-let to third parties. The proposal also includes a reduction in rental costs and revised lease terms across 393 stores.
Should the proposal be approved, the retailer says it will be required to make a maximum of 980 employees redundant. The company currently has a UK staff base of 15,300.
It adds all efforts will be made to re-deploy colleagues within the business where possible.
“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.”
“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 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. A priority for us is to keep all potentially affected colleagues informed during this difficult time.”
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By GlobalDataNew Look is seeking creditor approval on the proposal, which is due on 21 March. All UK stores will remain open as normal during the period of the proposal and the retailer’s online sales channel will be completely unaffected by the proposed changes.
Daniel Butters and Neville Kahn of Deloitte, the business advisory firm, have been appointed as nominees to the CVA.
Butters adds it is important to stress that no stores will close on day one, and employees, suppliers and business rates will continue to be paid on time and in full.
“The retail trading environment in the UK remains extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels,” he says.
“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. We have fully engaged with the British Property Federation and its members and their views are reflected in what we believe is a fair proposal to restructure the property obligations of the company.”
Charlotte Pearce, retail analyst at GlobalData, says 60 store closures will not be enough to turn New Look around.
She adds that while the store closures will lead to market share loss in the short term, it is a long-awaited and necessary move.
“The retailer’s plan to close just 10% of its UK store estate is not enough.”
“The retailer’s plan to close just 10% 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,” Pearce adds. “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”.
Last month, the retailer’s nine-month results left analysts with little positivity for 2018 following a drop in revenues and plans to cut costs, reignite product appeal and re-engage with customers in a bid to salvage its falling UK clothing market share.
New Look looks to cut costs amid sales declines
The news came on the back of withdrawal of credit insurance to many of its suppliers in January.
New Look under pressure as supplier cover withdrawn
