HSBC has withdrawn credit protection cover for some suppliers of embattled fashion retailer New Look, Drapers understands.
The credit protection insurance is thought to only affect a small number of New Look suppliers.
HSBC reduced the level of credit protection cover before Christmas but has now made the decision to withdraw it completely. Suppliers can continue to trade with New Look through HSBC without credit protection or under a supply chain finance scheme.
HSBC is understood to have notified all those suppliers affected last week. One supplier told Drapers the decision was made as a result of “additional information” not in the public domain.
However, there is speculation that New Look’s company voluntary arrangement, which was approved on 21 March and involves up to 60 store closures and 980 redundancies, prompted the decision.
One supplier affected said: “To supply New Look in this situation is very difficult. It was already very low margins. It’s got to make sense for us to take this risk and I just don’t know how New Look is going to make up the sales.”
The news follows credit insurer Euler Hermes withdrawing its cover and QBE reducing its level of cover for New Look “in places” in January amid concerns about the retailer’s performance.
A New Look spokesman said: “We do not comment on the status of individual supplier arrangements. As previously communicated, we have adequate liquidity to deliver our plans which provides us with the operational flexibility to meet challenges presented by changes in supplier credit arrangements. We continue to work closely with our core strategic suppliers that provide New Look with more than 80% of our product and remain confident in our supply model.”
In New Look’s most recent financial results for the 39 weeks to 23 December group revenue fell 6.3% to £1.07bn, group like-for-like sales dropped 10.6% year on year and the business reported an underlying operating loss of £5.1m.