New Look slumps to loss as falling sales and stock clearance take their toll
New Look has admitted last year was very difficult for its clothing business as it revealed bleak trading results amid both external and “self-inflicted” issues.
The British chain struggled with falling sales and widening loss in the year to March 2018, but it focused on a turnaround plan that is now “well underway” to deliver financial and operational stability for FY19.
The plan will help it recover after revenue slumped by 7.3% to £1.34m in the 52 weeks to 24 March, with sharp decreases in own-brand like-for-like sales (-11.4%), UK like-for-like sales (-11.7%) and own website sales (-19%). Only third party e-commerce sales performed well during the period, up 15.5% compared with the previous year.
The year also saw New Look report an adjusted EBITDA loss of £10.7m, including £34.2m of one-off costs like stock clearance, which the company said it had incurred to enable a “clean trading position” for the coming year. Underlying operating loss for the year was £74.3m.
To reverse its falling sales, the company implemented a series of measures that will be reflected in financial year 2019. These included a new pricing strategy to lower prices and offer better value, a return to value-led fast fashion and wardrobe basics, a renewed full-price focus and more flexibility in its supply chain. 80% of its product will now retail under £20, said the brand.
Additionally, New Look secured creditor backing for a company voluntary agreement (CVA) in March this year, joining the ranks of retailers embracing the insolvency process to cut rents and close underperforming stores. It estimates the CVA will help it save around £40m.
Further changes to marketing expenditure and delivery costs, reduced inventory shrinkage and other efficiency improvements have resulted in additional £30m annual cost savings, said the business.
“Since November, we have focused on making the necessary changes to get the company back on track and reconnect with our customers. Our turnaround plan is now well underway, and we have already made substantial operational improvements to help stabilise the business, reduce our fixed cost base and put us in a better position to drive future full price sales,” said executive chairman Alistair McGeorge in a statement.
“We have started the new financial year with a much cleaner stock position and are now seeing green shoots emerge.
“We still have more work to do to restore long-term profitability, but I am confident we are now better placed to achieve this than we were when I returned to the business over six months ago.”
New Look said early first quarter trading has indicated improvements in its womenswear range, and the company’s liquidity position has continued to improve. But it expects trading conditions to remain tough in the year ahead.
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