Jun 23, 2010
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New Look to freeze prices on key lines

Jun 23, 2010

LONDON - British fashion chain New Look will freeze prices on 20 percent of its products, including its most popular lines, despite a hike in VAT sales tax, but will have to increase other prices due to rising cost pressures.

Chief Executive Carl McPhail told the Reuters Consumer and Retail Summit that Tuesday's emergency UK budget, which also included a public sector pay freeze, would hit household finances and raise fears about unemployment.

New Look
New Look réalise à domicile 95 % de ses ventes avec des chaussures et la mode féminine. (Photo PixelFormula)

But he was also relieved the increase in value-added tax would not come into effect until January, and hoped shoppers would welcome an end to uncertainty, evident since an election in May, over how a new government would cut record state debt.

"From our perspective, it's been tougher in the UK -- although internationally much stronger for us -- since the election and I think that is about uncertainty," he said.

"I think now we'll get a better view into the future."

New Look, which has a focus on low prices and fast-changing fashions, gained market share during the recession, and McPhail said this would stand the firm in good stead if consumer spending turned back down again.

"We'll anchor 20 percent of our products -- the key volume lines. We'll ensure we'll maintain our position versus our competitor set," he said.

However, he joined rivals in warning there would have to be price increases elsewhere due to inflationary pressures from a range of factors, including as higher energy costs, rising wages in China and a weaker pound.

These pressures would drive prices up by between around 2.5 percent and 3.5 percent, not including the 2.5 percentage point increase in VAT to 20 percent, he said.


Despite tough trading conditions, McPhail saw plenty of growth potential for New Look from expanding in menswear -- which he is aiming to double in size to account for 6 percent of total sales over the next five years -- and, to a lesser extent, in clothes for two-to-10-year-old children.

The internet was another big source of potential growth, and could triple in size to account for about 9 percent of group sales over the next five years, he added.

McPhail said New Look, which shelved an initial public offering in February due to volatile stock markets, would make several improvements to its online offering over the coming months.

These would include enabling customers to order online in store from July, trialing a "click and collect" service around the end of the year that will allow shoppers to order goods online from home and pick them up in stores, and introducing mobile phone applications, also around the turn of the year.

New Look, which has over 1,000 stores in 13 countries, has seen online sales from overseas more than double over the past year to 7 percent.

This was helping to inform the group where to set up new stores, McPhail said, adding the initial focus would be on deepening its presence in France, Belgium and the Netherlands, and also expanding into Switzerland and Scandinavia.

New Look, taken private in 2004 by private equity firms Permira PERM.UL and Apax APAX.UL along with founder Tom Singh, has no immediate plans to relaunch its IPO, but would still like to float "at some point in time," he added.

(Additional reporting by James Davey; Editing by Sharon Lindores)

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