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New Look stalls Russian expansion due to political tensions

New Look has become the latest retailer to feel the chill from political unrest in Russia after announcing its expansion in the country is now on hold. The move came as the retailer revealed a 38.4% boost to its operating profits for the first quarter.

Chief executive Anders Kristiansen said Russia had turned into a “poor” market for New Look, given the political situation caused by the Ukraine crisis.

The retailer had stated in June that the country was one of its four international targets - the others being Germany, China and Poland - but Kristiansen said on Tuesday (August 12): “We’re not looking at Russia at the moment. We may later on, but we have paused it for now.”

The EU increased sanctions against Russia on July 29, restricting access to European financial markets, which followed a round of sanctions imposed in April, including travel bans and freezing assets.

This has already affected a number of retailers including German sports giant Adidas, which issued a profit warning late last month, blamed partly on the tensions. It has also said it plans to close some of its 1,000 Russian stores by 2015, but did not specify where.

The sports brand predicted its net income would be around €650m (£515m), revised down from €830m to €930m (£658m to £737m) for the financial year to December 31, 2014.

In February, Asos chief executive Nick Robertson said “adverse currency movements” in Russia had contributed to a slowing in the company’s annual sales growth.

Kristiansen issued his note of caution about Russia as New Look reported a 38.4% rise in operating profits to £43.6m for the 13 weeks to June 28 - which the retailer attributed to an increase in sales of full-price clothing.

Group revenue rose 8.1% to £392.5m for the period, while UK like-for-like sales increased 11.6%. Online sales soared by 39.2% during the 13 weeks.

The company said good weather, strong sell-throughs and capitalising on key trends, including kimonos and printed trousers, had resulted in a good start to the second quarter.

It has also received an offer from an unnamed Asian company for Mim, its loss-making French business. Kristiansen said he expects a sale within the next couple of months.

 

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