Credit ratings agency Moody’s expects New Look’s profit growth to outperform some of the other UK retailers it rates - namely House of Fraser and Matalan - over the next 12 to 18 months.
Moody’s based the analysis on New Look’s plans to open more menswear stores, roll out its beauty and accessory ranges and expand in China.
“It also has the most flexibility to scale back capex [discretionary capital expenditure] spending to boost free cash flow,” says David Beadle, Moody’s vice president and senior credit officer.
The firm said debt maturities, while not imminent, will loom first for House of Fraser and Matalan.
Beadle said he believes Matalan’s capital structure is unsustainable at current levels of profitability, while House of Fraser’s Christmas results suggest it is likely to deliver stronger year-on-year profit growth in the final quarter of its 2017 financial year.
“However, if this is not the case or if it fails to sustain the improvements in 2017, it may also find refinancing in a timely and cost effective manner more difficult,” he said. “By contrast New Look has no term debt maturities until 2022, which gives it more time to deliver.”
He also points to New Look’s strong online penetration, smaller stores and shorter average leases than its peers, which give more flexibility to adapt its operations.