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New Look is still suffering from falling sales more than a year after reaching agreement on a restructuring of its store estate, adding to fears about the health of the UK high street as the election campaign gets under way.
In the half year to September 28 the fashion retailer said same-store sales were down 7.4 per cent in the UK and Ireland, with a strong summer more than cancelled out by a poor September.
Total sales in the core market of the UK and Ireland were down 13 per cent, partly because of the closure of 98 stores using a company voluntary arrangement.
Conditions were tough for all retailers in September but executive chairman Alistair McGeorge said the decline also reflected the circumstances a year earlier.
“We were having to run the business for cash just to stay alive so we maximised our sales but trashed our ebitda,” he said.
Earnings before interest, tax, depreciation and amortisation fell roughly £20m to £42.6m, with half the decline the result of the decline in sales.
Finance director Richard Collyer also noted that trade credit insurance, often withdrawn as retailers run into financial trouble, had been slow to return because insurers wanted to see more evidence the business was recovering.
In addition to reshaping its store estate, New Look has refinanced more than £1bn of debt, withdrawn from China and other markets, stopped selling menswear in its UK stores, strengthened its management, revamped its supply chain and switched emphasis away from “fast fashion”.
But Sofie Willmott at GlobalData said these actions “have not been enough to drive growth and steal share from stronger rivals such as Zara and Primark”, adding that its focus on thirtysomething customers left it “at risk of offering a range that is too safe”.
The company is one of several retailers to have pushed through a CVA last year, only to find that trading has remained difficult. Floor coverings group Carpetright is set to go private, while Mothercare put its UK business into administration last week. Both had closed stores and raised new money from investors.
Mr McGeorge said he had always been clear that “CVAs do not fix businesses”.
“You fix a business by having a new strategy, better implemented. A CVA just gave us breathing space by reducing our costs,” he said, adding that the company was “very confident” that actions taken since the debt restructuring would improve financial performance.
Both he and Nigel Oddy, the former House of Fraser chief executive brought in this year as chief operating officer, declined to comment on current trading but said they expected improvements after the election.
“What customers need is certainty, and once there is some certainty you can expect to see confidence coming back,” said Mr Oddy.
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