New Look hails progress but says there are still challenges ahead
It’s fashion retailer New Look’s 50th anniversary year and while the company isn’t quite where it would have wanted to be as it hits its half-century, it does seem to be getting back on track after a very bruising few years.
On Tuesday, it hailed a return to underlying profitability in the year to March 30, driven by its turnaround plan, and said it has entered the new financial year with “financial and operational stability.”
What did that mean in numbers? Well, it's worth pointing out that the accounts cover a 53-week period compare to a 52-week one in the previous financial year, so the revenue figures were flattered by that extra week.
In its continuing operations – that is, the UK and Republic of Ireland (ROI) retail, e-tail, third party e-tail, franchise, plus France and Poland – it recorded a revenue drop of 3.8% to £1.239bn. This was in line with expectations given the focus on driving more profitable sales through a reduced number of stores.
The core like-for-like business (the UK and Irish directly-operated retail and e-tail ops) saw a sales fall of 1.6%, much narrower than the 11.6% plunge of a year earlier. It's important that New Look’s UK and Ireland operations should see strong signs of progress as it has been retreating from its international businesses. Its international strategic review has meant the closure of its China venture and appointment of administrators in Belgium, France and Poland.
On the profits front, it saw much higher core adjusted EBITDA, rising to £80.2m from £18m, “demonstrating strength in key focus areas following [the] financial restructuring.” And its core underlying operating profit was £33.2m after a loss of £35.7m a year ago. However, the statutory pre-tax loss was a hefty £522m compared to a loss of £190.2m in the previous financial year, mainly due to a £423.3m non-cash goodwill and brand impairment charge linked to the restructuring.
And of course, company debt is now much lower after its comprehensive restructuring plan launched last month. Long-term debt has been cut to £350m from £1.35bn and it has £150m of new long-term capital.
So clearly, what we have is a company that's getting back on its feet but still has a way to go before its recovery can be declared complete.
New Look highlighted the progress it has made, hailing its year-on-year increase in profitability across key womenswear categories such as dresses, separates and ‘going out’, but said there are challenges still being addressed, particularly with footwear and accessories.
There was good news on its like-for-like customer conversion. It improved both in-store (+3.5 percentage pts) and online (+5.5 percentage pts), and the chain kept its number two UK womenswear market share position (18 to 44 age range). It even said it outperformed the UK market for core women’s clothing in stores by 4.5 percentage pts.
As the figures suggest, the company has been driving its e-commerce operations forward, with a bigger focus on profitable sales and that meant e-commerce underlying operating profit soared 78.2% to £21.2m. And the e-tail focus helped its shops too as click & collect and e-tail returns “continue to drive footfall into stores.” It has also launched ‘order in-store, collect in-store’ and photo search functionality, further enhancing the customer experience and said sales from its mobile app now account for 10% of e-commerce turnover.
So how does management feel at this stage in the game? Executive Chairman Alistair McGeorge on Tuesday talked up how much has been achieved and the progress made. He highlighted how the e-commerce and store businesses “are now working together better than ever, and we are starting to see the benefits of improved speed to market.”
But he conceded that the past year has been “incredibly challenging for our colleagues, investors, suppliers, creditors and other stakeholders” and although New Look “enters the new financial year in a fundamentally healthier and stronger position, in many respects, today marks the starting line. We have more work to do to enhance trading and deliver further operational improvements as we continue our turnaround plans.”
He expects the retail environment “to remain as challenging as ever in the year ahead, with continued Brexit uncertainty and unseasonable weather impacting current trading,” although frustratingly, he didn't expand further on just what is happening with current trading.
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