New Look recovery on track but weakness remains
New Look said on Tuesday that it's narrowing its losses, even though its total revenue has fallen and it’s continuing to face consumer uncertainty and seasonal volatility. But its performance is clearly improving and the company’s leadership team thinks it's on the right track, even though the 'wrong' weather in September was a problem.
The value-focused fashion retailer released first-half results for FY20 and reported a statutory loss before tax of ‘only’ £11.2 million, which was much better than the £41.9 million loss of a year earlier.
But challenges remain as other figures show. Adjusted EBITDA of £42.6 million, was down from £62.5 million a year ago and total revenue fell to £523.8 million from £601.1 million. While total revenue would be expected to fall at any company that’s been closing stores, the fact like-for-like sales in the UK and Republic of Ireland were down as much as 7.4%, reflects the very tough market the firm still faces. But at least the performance improved in the second quarter. Like-for-like sales were down 10.1% in Q1 but only 4.6% in Q2.
The company seems to be reasonably upbeat after working hard to make sure the product on offer is right for the customers and conditions it's facing. It said that ‘core’ and ‘broad appeal’ clothing categories represent 98% of its Autumn/Winter product mix vs 75% ‘trend’ and ‘fashion’ last year. And it has significantly reduced options by 25% in-store and 32% online to “enhance the customer experience”.
It has also improved its speed to market with average lead times reduced by 12 days, while Click & Collect now represents 45% of online sales.
The company added that its ‘Revive’ investment programme in smaller profitable stores is “delivering strong LFL performance,” and it has introduced concessions, replacing in-store menswear.
Like many of its retail peers, it's also reaching out to businesses that would formally have been seen as rivals and said it has “launched new routes to market via online partnerships with eBay and Next”.
So what did chief operating officer Nigel Oddy have have to say about it all?
“Following a tough first quarter, we delivered positive LFL sales throughout July and August, but September was impacted by the unseasonably warm weather, which affected the sector in general,” he explained. “Despite this, we kept good control of our cost base, and all is to play for as we enter peak trading.”
Executive chairman Alistair McGeorge added that the firm has “made good, tactical progress to improve our product, speed to market and leadership capabilities, all whilst maintaining good control of our stock, cash and costs. We are reviewing our customer strategy, and, as I have said before, investing in our leadership and people will be the single biggest enabler to transforming our business”.
He highlighted that this time last year “we were forced to trade for cash to meet our interest obligations and we lacked the financial stability needed to operate effectively and invest in the business. Now, with our financial restructuring complete, we are in an entirely different position, with a materially deleveraged balance sheet, lower cash debt servicing costs and strengthened liquidity.
“Even set against the tough trading conditions of H1, we enter H2 with much improved operational foundations and a healthy balance sheet capable of weathering continuing volatility in the retail and consumer environment. Whilst we do not expect the retail environment to improve, we expect a better second half performance as we focus on driving profitable sales, maintaining strong control over our cost base and investing prudently in our people.”
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