New Look’s proposal to close up to 60 UK stores through a company voluntary arrangement is “long awaited”, but does not go far enough to cut costs at the struggling retailer, industry experts have said.
On 7 March New Look revealed details of its CVA proposal, which would lead to the closure of 60 of its 593 stores. A further six sites are already sublet to third parties. The plan also includes rent cuts and revised lease terms across 393 stores.
Redundancies are expected to affect a maximum of 980 members of staff. New Look currently employs 15,300 people in the UK and said “all efforts will be made to redeploy colleagues within the business where possible”.
While New Look awaits creditor approval, which is due 21 March, some property and retail sources said the retailer would need to take further action to turn its fortunes around.
“It doesn’t go far enough”, said one property source. ”They’re in a situation where they are cutting 60 stores, which isn’t a huge amount. A number of other fashion retailers have similar stature in the market but with fewer stores, so they should be closing more than 60. New Look doesn’t need that many stores in the current UK retail market.”
Charlotte Pearce, retail analyst at GlobalData, agreed: “While the closure of stores will lead to market share loss in the short term, it is a long-awaited and necessary move. New Look is now in danger of slipping out of the top 15 UK clothing retailers this year.
“The retailer’s plan to close just 10% of its UK store estate is not enough, and New Look must continue to rationalise its remaining oversized store network, given it is a huge encumbrance for the retailer. A leaner store estate will improve space productivity, increase profit per store and provide a more consistent brand image, which is much needed for the retailer’s survival’’.
Another retail analyst said: “History shows that CVAs are delaying the inevitable, rather than being a solution. It will be a close call, and it really depends on the landlord’s view of what short- and long-term retail really is.”
However, one property director was optimistic the business could get back on its feet: “It’s a company with structural and debt issues. Especially if you overlay current figures for the year, it shows you don’t need to do much wrong in the current market to fall. It’s ferociously competitive.
“[The CVA] is right for the business to do, but not a big shock for the market. New Look has a place in the market, and the public doesn’t have a problem with the brand. They just need to get their market position, costs and business side right.”
On announcing the CVA, Alistair McGeorge, executive chairman of New Look, said: “Given our challenged trading performance and over-rented UK store estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability.
“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal. A priority for us is to keep all potentially affected colleagues informed during this difficult time.”