More woe for New Look as supplier insurance cover is in doubt
Embattled New Look just can’t seem to catch a break at the moment. The value fashion retailer, which was once a UK sector star but has struggled to return to growth of late, now faces a major insurance issue.
Credit insurer Euler Hermes has stopped offering insolvency cover to New Look’s suppliers as its own problems and the aftermath of a troubled Christmas trading period see a number of fashion and department store chains with big question marks over their future.
New Look, whose credit rating hit junk level in December, has also seen another insurer reducing levels of coverage for those who supply it, The Sunday Times reported.
While shipments agreed before the cover ban/reductions came into force are still being insured, it means that future supplies for the firm could be in peril.
Credit insurance is hugely important for suppliers as it gives those firms the confidence to provide chains with product without fear of not getting paid if the retailer goes under.
The lack of such insurance was a big issue in the failure several years ago of major names Woolworths and Zavvi.
If suppliers can’t get insurance cover, they may demand money upfront for the goods or simply refuse to supply the firm. As New Look enters a fresh fashion season, that’s disastrous news.
But analysts said that its supplier credit problems aren’t only because of its own performance. New Look is controlled by South African billionaire Christo Wiese through his investment company Brait. Wiese is also the biggest shareholder of Steinhoff, the South African retailer that owns the UK’s Poundland. Steinhoff has been caught up a tide of accounting irregularities and senior level departures and these issues are also believed to have had a knock-on effect and impacted confidence in the British fashion chain.
But New Look does appear to have enough cash to function for now. It earlier said it had cash reserves of over £240 million, which should carry it through.
It’s not the situation Alistair McGeorge would have wanted to be in when he returned to the firm last year to spearhead the long-hoped-for turnaround.
For now though, we don’t know what his thinking is. New Look isn’t commenting and we’re unlikely to hear any details on just what’s happening until next month when a trading update is due.
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