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New Look like-for-likes slump against strong comparatives

New Look said that group like-for-likes fell 3% in the 26 weeks to September 25 after the value chain came up against strong comparatives and was impacted by the disruption caused by the relocation of its head office to London.

The like-for-like sales drop was more marked in the UK, where like-for-likes over the period fell by 4.5% compared with a 7.5% increase the same period a year ago when total group like-for-likes were also ahead 1.8%.

UK market share

New Look said that despite the drop in like-for-like growth, the chain had notched up 6% market share by value in the UK in the 24 weeks to September 5 up from 5.7% according to data from TNS Worldpanel Fashion, consolidating its position as the second largest women’s clothing and accessories retailer.

Total sales jumped 3.2% to £731.1m on group underlying EBITDA of £119.5m, an increase on the same period last year when sales were £708.4m and EBITDA. However, New Look reported underlying operating profit down from £77.8m to £73.5m in the period.

International

The international arm of the business outperformed the UK, with like-for-likes up 2.4% compared with a slump of 17.4% in the previous year’s first half. The retailer, which operates in 122 markets and has 1,034 stores worldwide, said that it had experienced some recovery in France - including its spin off value chain MIM - and the Netherlands but that the overall performance had been impacted by a poor performance in Ireland as well as the UK market.

Ecommerce

Online sales rose 68% during the first half following the launch of New Look’s second generation site, to become the 3rd most visited online fashion retailer with about 1.7 million visits per week according to data from Hitwise for July to September. The chain will introduce multi-lingual sites and a click and collect function next year.

New Year price rises towards 8%

New Look chief executive Carl McPhail said: “We are pleased to have grown market share and strengthened our position in the UK, despite strong comparatives and worsening market conditions. We also suffered from some personnel disruption arising from the move of our buying, merchandising and design teams to central London last year, which contributed to the decline in UK like-for-like sales. This decline was partially offset by continued strong progress in our ecommerce and international businesses.”

McPhail added that he expected the environment to remain difficult, and that increasing input costs from rising cotton prices and freight costs and the increase in VAT in January would lead to price rises in the New Year, likely to be at the top end of the 5-8% largely forecast by the industry.

“We expect like-for-like growth to remain subdued in such an environment,” he said. “However we are confident that the proven strengths of our brand and business model will allow us to react appropriately to market conditions and to deliver growth in the longer term.”

Christmas

He added that he expected that the consumer would continue to spend at Christmas with key products already selling well including footwear, particularly fur-lined boots, outerwear, party dresses, knitwear, including Fair Isle and chunky knits and dresses strong performers. The chain will not go on Sale in the run up to Christmas, he added.

Financial structure

The chain, which postponed its IPO earlier this year said that it would consider its options for revisiting the flotation if the right opportunity arose but said that it would focus on reviewing its options regarding its capital structure.

The chain has about £240m cash and has reduced its debt, said McPhail. He added that the chain would expect its full year capex to be about £90m and that the group would roll-out new EPoS systems, bring its ecommerce in-house and continue to invest in refurbishing stores.

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