Updates to the new look

Fashion retailer New Look has warned that the Covid-19 pandemic could still pose a threat to its survival despite the completion of a second major financial restructuring last year.

Its annual accounts released on Tuesday indicated that while current trading is encouraging and its financial situation is much more stable, any further blockage that was not accompanied by government backing could cause it to violate loan covenants and require additional funding.

The comments highlight how badly the government’s intervention, including corporate tariff relief, the holiday regime and the moratorium on evictions, has been for the retail sector over the past 15 months. All three are being phased out as lockdown restrictions are lifted.

Such “material uncertainty” warnings based on very pessimistic internal scenario planning are not unusual among retailers; discounter Matalan made similar comments. But in New Look’s case, they come despite a complex financial restructuring in 2020 through which more than £ 400million in debt was converted to equity and most of its 467 UK and Irish stores moved to rent. based on turnover.

This allowed him to write back £ 134million of impairment charges recorded the previous year and to record a similar gain against the change in his lease payables, pushing him to operating profit for the year. ended March 27 by £ 177million against a loss of £ 338million for the year. before.

Without the one-time gains he would have recorded an operating loss of £ 91million. New Look has been hit hard by the pandemic due to its already delicate financial situation and relatively high reliance on in-store sales compared to competitors such as Next.

The group’s entire store base was only open for seven of the 52 weeks in the period and despite a strong increase in online sales, overall revenue fell to £ 542million from £ 912million. pounds sterling the previous year.

Profit margins also declined, as relatively fixed distribution costs were absorbed by a lower sales level, and rebates were required to eliminate unsold inventory after closings.

Managing Director Nigel Oddy said the results clearly do not reflect the health of the company as it stands today. We are in a fundamentally stronger position following the successful recapitalization and the CVA ”.

He also said he was encouraged by the first quarter trading. Total sales in the 13 weeks leading up to June 26 were up 181% from a year ago, a period that included the first UK-wide foreclosure. Like many other retailers, New Look experienced a drop in footfall but a better conversion from browse to buy.

Online sales in the first quarter were up 3.8% from a year ago, but 43% from the equivalent period before the pandemic.

Oddy added that with the group’s balance sheet and rent bill now reset, New Look had “a great opportunity” to grow sales online and through its stores, many of which are located in relatively prosperous market towns.


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