New Look revenue drops in year-to-date but Q3 comps uplift is sign of progress
There were some negative figures in New Look’s end-of-Q3 report on Wednesday but the company also had positive news and hailed its “continued progress in delivering improved operational and financial stability amid [a] challenging retail environment.”
It said that revenue has fallen 5% in the first nine months of the financial year (the period to the end of December) to hit £1.016 billion, which was “in line with expectations given [the] focus on driving more profitable sales.”
New Look brand like-for-like (LFL) sales fell a smaller 2.3% for the nine months as a whole, much better than the almost 11% plunge of this time last year. And with the “third consecutive quarter of improvement in the LFL trend”, Q3 itself actually recorded a rise - albeit a small one at +0.9%.
There was more good news in the profit figures too. Core UK and Ireland adjusted profit on an Ebitda basis rose 75% to £97.7 million, supported by cost savings, while group adjusted Ebitda rose 78% to £78 million. Group underlying profit was £38.5 million, a marked improvement on the £5.1 million loss made a year earlier.
The company said its turnaround is progressing with a return “to proven broad appeal product” and an ongoing improvement in year-on-year profitability in key womenswear categories such as dresses, tops and bottoms. However, “some challenges [are] being addressed in footwear and accessories.”
And the firm highlighted that it’s still outperforming the British Retail Consortium’s figures for UK sales of core clothing in its stores with a nine-month rise of 5.5 percentage points. And it's beating the BRC figures online too with a Q3 1.7 percentage point uplift. That has helped it to improve its UK market share.
It also said in-store and e-commerce customer conversion rates have continued to improve while e-commerce profitability has increased “significantly”. And that increase is helping its physical store operations as well. Customers ordering their online goods and selecting click-and-collect are driving footfall into stores and this delivery method has increased to 47% of the online sales mix from 44% a year ago.
The company has had more positive news far as its balance sheet is concerned since Q3 ended with its recent funding deal, a debt-for-equity swap, aiming to cut its long-term debt significantly. The transaction is progressing and should be complete during Q1.
Also boosting the balance sheet is the recent decision to exit Belgium and the completion of its exit from the retail business in China with all of the shops shut as of January 1 as planned.
Executive Chairman Alistair McGeorge said on Wednesday: “Today’s results show that we continue to make good progress in delivering improved operational and financial stability despite the challenging retail environment. Our return to broad appeal product continues to enhance profitability, our supply chain lead-times have improved, and we have exceeded our planned cost savings. However, we have more work to do and our focus is now on accelerating our turnaround plans.
“Central to this is finalising our financial restructuring, which will secure the future and long-term profitability of the company. The proposed restructuring has provided our colleagues and suppliers with renewed confidence, which will benefit the company at every level. The right capital structure and a materially deleveraged balance sheet will provide us with the financial flexibility to better attack our future amid challenging market conditions.”
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