New Look improves in H1 but challenges remain
New Look has faced tough times in the last few years and it’s not out of the woods yet. But the UK-based value fashion retail giant said Tuesday that its profitability improved in the first half on the back of continued delivery of its turnaround plan.
The 26 weeks to September 22 weren’t exactly a triumph though, as revenue fell 4.2% to £656.9m. But this was in line with expectations and was driven by a focus on more profitable sales.
New Look Brand like-for-like sales fell 3.7% in the period, better than the 8.6% fall this time last year and it was the second consecutive quarter of improvement in the LFL trend. But we can’t get away from the fact that comparable sales are still dropping.
What did it all mean for profits? Adjusted EBITDA increased to £49.8m from £24.2m “supported by cost savings,” while underlying operating profit was £22.2m, from an underlying loss of £10.4m a year ago.
The company said it saw “improved sales and profitability in key womenswear categories.” In fact, its women’s clothing in UK stores outperformed the market by 5.6 percentage points and it saw an improvement in overall UK market share. But it added that there are “challenges remaining in footwear and accessories.”
It has seen other areas getting better too with its in-store and e-commerce customer conversion rates having continued to improve since Q1. E-commerce profitability increased “substantially” again and the logic of having a large store estate was illustrated by the click & collect sales mix continuing to drive footfall into stores and increasing to 41% from 28% 12 months ago.
Executive chairman Alistair McGeorge said that he’s “encouraged” by the H1 performance “which reflects the progress we are making with our ongoing turnaround plans to rebuild our position in the UK womenswear market. The significant cost savings which have been implemented are delivering improved profitability and we continue to see better performance in our new womenswear ranges.”
He added that the company is “making good progress in recovering the broad appeal of our product, evidenced by the improvement in our market performance and customer conversion rates. We expect this to continue in the second half as the changes we have made in the remaining categories of our product review start to take effect.”
But he also said that while the company will still “work hard to accelerate our progress, we are facing significant headwinds and uncertainties, including Brexit. Clearly the wider retail environment remains challenging and we are not expecting that to change any time soon.”
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