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Credit insurers cut cover for New Look suppliers

Some of the credit insurers for New Look’s suppliers have cut their cover, amid concerns about the retailer’s poor performance.

Credit insurer Euler Hermes has stopped offering cover on new shipments of goods to New Look, although it is still providing “residual” cover on existing orders.

Another insurer, QBE, said it had reduced its level of cover for New Look “in places”, but has not withdrawn it altogether.

New Look declined to comment.

One industry source observed: “It is always difficult for suppliers when credit is removed, as it means the terms have to be renegotiated. It makes suppliers very cautious about running production and developing new orders.

“Sadly I think [New Look] will be the first of a handful of retailers that will face a similar challenge in the year ahead, as seasonal sales have left a number with large stocks and gaps in their sales forecasts. Financial institutions are wary about the state of retail at the moment and how they support it.”

Another industry source noted that despite supplier nervousness, the withdrawal of cover is “not regarded as terminal”: “Some insurers have pulled cover but there are significant ones that are holding their position. They will be watching for a Christmas trading update from New Look – if it shows some improvement, there’s a greater chance of existing cover being maintained. It will be key to [figuring out] where the underwriters will stand.”

In New Look’s most recent financial results, for the 26 weeks to 23 September, total revenue was down 4.5% to £686m.

Adjusted EBITDA plummeted by 72.2% year on year to £24.2m, which New Look put down to the “challenging” UK sales performance.It reported an underlying operating loss of £10.4m, compared with a £59.3m profit in the same period the year before. 

Chief executive Anders Kristiansen left the retailer in September. Soon after, former New Look executive chairman Alistair McGeorge was parachuted back into his old role.

McGeorge was previously executive chairman of New Look from May 2011 to September 2013, during which time he was credited with turning its fortunes around. He was also non-executive chairman from October 2013 to May 2014.

 

Readers' comments (1)

  • It wasn’t long ago senior management were bonused on the takeover. Wow.

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