New Look reported core underlying operating profit of GBP33.2m (US$42.4m) for FY19

New Look reported core underlying operating profit of GBP33.2m (US$42.4m) for FY19

The turnaround strategy at New Look appears to be paying off after the UK fashion retailer returned to underlying profitability in its last full year, yet the company admits there is still more work to do. 

For the 53 weeks to 30 March, the company reported core underlying operating profit of GBP33.2m (US$42.4m), compared to an underlying operating loss of GBP35.7m the year before. The retailer's 'core business' comprises UK and Republic of Ireland (ROI) retail, e-commerce, third-party e-commerce, and franchise. 

However, the retailer's statutory loss before tax widened to GBP522.2m from GBP190.2m last year, which it blamed on charges relating to its restructuring.

Revenue also slipped 3.8% to GBP1.24bn in the period as the retailer focused on driving more profitable sales and fewer stores. Core like-for-like sales, which reflects UK and ROI retail and e-commerce as owned New Look operations, fell by 1.6%. This compares to an 11.6% decline in fiscal 2018.

Meanwhile, its e-commerce underlying operating profit surged 78.2% to GBP21.2m, up from GBP11.9m last year. 

In its full-year earnings release today (25 June), New Look hailed its progress in returning to proven broad appeal product and value-led pricing, and said some remaining challenges are being addressed, particularly footwear and accessories. It also maintained its number two position for overall womenswear market share in the 18-44 age range.

Executive chairman Alistair McGeorge admitted: "We have more work to do to enhance trading and deliver further operational improvements as we continue our turnaround plans."

A fresh start

Chloe Collins, senior retail analyst at GlobalData, notes store that while closures heavily contributed to New Look's revenue decline of 3.8%, its negative like-for-like sales and a decline in online penetration prove the company still has a long way to go to win back shoppers.

"New Look's withdrawal from some of its international markets, as well as its decision to cut its menswear offer from stores from autumn 2019, will aid the retailer's re-focus on its core womenswear customer and value-led fast fashion.

"Although the retailer reported growth in some areas, such as dresses and going out clothing, footwear and accessories remained a challenge. As New Look offers a large wide fit footwear range unlike most of its competitors, the retailer must fully utilise this USP and invest heavily in design to drive range appeal.

"Development in New Look's niche clothing ranges – petite, tall and curves – should also be a priority to champion inclusivity and compete with range expansion by online pureplays such as Boohoo.com and PrettyLittleThing."

Collins adds it is "concerning" that New Look's online sales saw a step back during FY2018/19 and investment in its digital platforms must be a priority to compete with the growing number of online pureplays.

She adds: "New Look must offer a more competitive delivery saver scheme to encourage more frequent purchases on its own site, with its current price of GBP19.99 expensive for a value player, in comparison to the GBP9.99 charged for Asos Premier – one of New Look's third-party partners.

"New Look has however seen an increase in online shoppers choosing to Click & Collect (41% vs 36% in FY2017/18) and must exploit this by encouraging add-on sales through inspiring merchandising and attentive customer service in store.''