New Look plots closure of 60 shops as high street pain grows
New Look is examining plans to slash its rent bill and close up to 60 of its high street shops, Sky News learns.
Friday 12 January 2018 06:14, UK
New Look, the fashion retailer, is weighing a plan to close about 10% of its British stores in another sign of the tumult facing the high street.
Sky News has learnt that the South African-owned chain is drawing up proposals for a Company Voluntary Arrangement (CVA), a process often used by struggling retailers to restructure financial obligations to creditors.
Sources said on Thursday night that New Look's CVA plan was not yet finalised and was only one of a number of options under consideration.
A decision about whether to proceed is expected to be taken in the coming weeks, and would require the consent of bondholders.
If it does go ahead with the store closures, roughly one-tenth of New Look's nearly-600 outlets in Britain would be axed, with sizeable rent reductions sought at many of the remaining shops.
Landlords and other creditors would be asked to vote on the plan later this year.
New Look is the latest in a series of big names to examine a radical shrinking of their store portfolios amid rising pressures from online and discount rivals, increased labour costs and a deteriorating outlook for consumer confidence.
Toys R Us UK won approval for a plan to close about a quarter of its stores shortly before Christmas, while Sky News revealed last week that House of Fraser, the department store chain, was asking landlords to reduce its rent bill.
A flurry of trading updates during the last ten days has revealed typically mixed fortunes for Britain's high street giants, with Marks & Spencer disclosing on Thursday that like-for-like sales had fallen over Christmas in both its food and clothing businesses.
Debenhams and Mothercare have been among the other big losers, while Next performed better than expected.
New Look's performance has stuttered during the last year, with former boss Alistair McGeorge returning as its executive chairman in November.
He described the retail environment as "challenging", but said improving its fortunes would not be an overnight job.
Like-for-like sales at its UK stores fell by over 8% in the most recently reported period.
Last weekend, The Sunday Times reported that credit insurance had been withdrawn to many of New Look's suppliers, a move that would force the company to pay for products up-front.
The company has been owned since 2015 by Brait, an investment vehicle headed by businessman Christo Wiese, who also has interests in Virgin Active and the Iceland supermarket chain.
Mr Wiese is also connected to Steinhoff, the South African holding company which has been rocked by a huge crisis over its previous accounts.
Steinhoff owns British retailers such as Poundland and is expected to seek to offload them as it tries to raise cash.
New Look declined to comment on the potential store closures on Thursday night.