New Look today said its stores and online businesses were working together better than ever, at the end of a year in which the fast fashion retailer has closed more stores than it expected, and focused on profitability.
New Look, an Elite retailer in IRUK Top500 research, reported falling sales and widening pre-tax losses in its full-year figures – but pointed to a return to operating profit.
The fast fashion retailer said sales of £1.2bn in the year to March 30 were 3.8% down on the same time last year, with like-for-like sales down by 1.6%. Earnings before interest, tax and asset write downs (EBITDA) came in at £80.2m, up from £18m a year earlier, while operating profits of £33.2m demonstrated a recovery from a pre-tax loss of £35.7m last year. But pre-tax losses of £522.2m, reflecting a £423.3m write down in the value of goodwill and its brand, were up on a loss of £190.2m a year earlier. That write-down comes as a result of a change in ownership through this year’s restructuring since the New Look Retail Group is no longer the parent company of New Look Ltd and its subsidiaries - having been replaced in the course of the restructuring transaction by Jersey-based business New Look Retail Holdings.
By the end of the year, New Look had 491 stores in the UK and a further 27 in the Republic of Ireland. That’s fewer than it had expected as landlords took up their option to close stores following the CVA. It identified 66 stores for closure, of which 43 are closed or closing, while rents have been renegotiated on 23 others. However, a further 67 stores are closed or closing as landlords took up their option to end leases - taking total closures to 110.
New Look executive chairman Alistair McGeorge said the retailer had achieved a “remarkable amount” over the year, improving profitability, recovering product appeal, and delivering on cost savings and financial restructuring. “Our ecommerce and store businesses are now working together better than ever, and we are starting to see the benefits of improved speed to market,” he said.
But he said that New Look was still at the starting line, with more work to do to improve trading and operations as part of ongoing turnaround plans.
“We can expect the retail environment to remain as challenging as ever in the year ahead, with continued Brexit uncertainty and unseasonable weather impacting current trading,” said McGeorge. “However we will continue to focus on what is in our control by further enhancing profitability through our fantastic product, building brand equity and grasping new market opportunities."
New Look says that “stores remain at the heart of the New Look experience,” with physical stores the primary port of call for its customers. However, it said, customers are increasingly using digital and physical channels together to brow, cmopare, buy and exchange or return. “Our ongoing investment is focused on maintaining full alignment between our in-store and online businesses, and improving the customer experience,” said New Look in its annual report today.
During the year, store footfall benefited from multichannel services, such as click and collect – picking up online orders in store – and returning those orders to store. During the year it also launched an order in-store, collect in-store service. Sales from the mobile app accounted for 10% of online sales. Photo search functionality was also introduced in order to improve the customer experience. Sme 41% of online sales were picked up in a store during the year, while 64% of ecommerce returns were taken back to a store.
Customer conversion rate improved both in store (+3.5 percentage points (pp)) and online (+5.5pp), helping it to outperform the women’s clothing market by 4.5pp. Its ecommerce strategy is focused on making profitable sales, and the retailer said underlying operating profit had improved by 78.2% to £21.2m,from £11.9m last time.
Pricing was aligned across channels and commerce profitability has improve following, said McGeorge, “our change in strategy from chasing top line sales growth, competing with the pureplays, to focusing on profitable sales” through a strategy of being the ‘first to be second’ on key trends.
During the year the retailer saved costs of more than £80m, including costs from “over-rented” stores and delivery. It also also closed its Chinese business and appointed administrators in Belgium, France and Poland.
New Look pointed to particularly challenging market conditions in the third, October to December, quarter of its financial year, thanks to “a prolonged period of promotional activity across the high street, starting with Black Friday and continuing through to Christmas, an unprecedented decline in footfall, the unplanned reduction in store numbers due to landlord enforced closures following the CVA and the ongoing uncertainty related to Brexit."
New Look marks its 50th anniversary this year, and founder Tom Singh has said he will step down from the business where he is currently a non-executive director at the end of June.
Image: InternetRetailing Media/Paul Skeldon