Martin Flanagan: New Look's troubles are symptom of wider high street gloom

NEW Look's derailed flotation might imply that the fashion retailer never got out from under the long shadow cast by Debenhams' poor showing since again going public in 2006.

But it is probably more likely that New Look's timing was bad given the flurry of other would-be flotations that have capsized at the jetty. And perhaps that the company is not niche enough to stand out in these difficult times.

It is true that Debenhams was a department store business that came back to the market hobbled by more than 1billion of debt.

And New Look was going to have 450million of borrowings weighing on it after its initial public offering (IPO), costing it 30m a year just to service the debt pile.

Private equity in the form of Texas Pacific, CVC and Merrill Lynch Private Equity was behind Debenhams from 2003. And New Look has the Apax and Permira private equity houses on board since going private in 2004.

The City has become leery when private equity takes profits and floats off much of its interest so that the best value has already gone out the swing-doors.

I wrote at the time of the Debenhams' flotation: "The concern is that the private equity owners might already have squeezed everything they could out of the company, selling property, slashing capital spending on store refurbishments, cutting staff numbers and extending the time taken to settle bills."

Debenhams' subsequent share price performance was also never going to do New Look any favours when it was hawking its IPO around the City. Debenhams floated again at 195p, compared to a closing price yesterday of 63.65p, with the stock also having touched a year-low of 33.6p.

But there were key differences between the two retailers and their flotation plans. While, still a big figure, New Look's debt was going to be less than half of what Debenhams had to struggle under.

In addition, there was always a suspicion that private equity and Debenhams was more of a financial engineering play, while Apax and Permira have invested 450m in New Look. Apart from its near-600 UK stores, New Look is already trading in 13 overseas markets while Debenhams, because of its trading requirements, had far less of a UK presence, store wise, and its foreign expansion has only really begun since its IPO.

So I think the monochrome Debs backlash scenario for the New Look flotation postponement is simplistic.

The comparisons were not irrelevant, but there were enough differences to suggest other forces were at work.

None more so, one suspects, than the more general pressures facing the high street in the coming year or two, with tax rises on the way and consumers' discretionary spending being potentially badly squeezed. Equally for the sector, the fear of any double-dip recession doesn't bear thinking about.

On a bespoke level, there was also some concern that New Look was not flamboyantly niche enough in this tough climate. What is its unique selling proposition?

Primark and Top Shop seem to have done a better job in cornering the fast fashion market, while I'm reliably informed that most style-conscious teens and twentysomethings at the ritzy end of the market head straight for the likes of Abercrombie & Fitch, Monsoon and their ilk.

This investor nervousness about flotations is clearly not just affecting retailers, however.

Anyone whose business targets consumers must have their work cut out in trying to drum up support among investors for an IPO amid the current backdrop.

And that's even without the extra jitters currently surrounding a virtually bankrupt Greece and the whole question of sovereign debt.

Merlin Entertainments, owner of the London Eye among other attractions, and backed by buyout group Blackstone, has also just pulled its IPO this week, as has airline and hotels booking firm Travelport, which was also supported by Blackstone.

New London Stock Exchange boss Xavier Rolet's confidence last year that the exchange had a good pipeline for flotation earnings in 2010 is beginning to look more torn and frayed virtually by the day.

And Kraft's controversial takeover of Cadbury is looking less like a gate-opener for more sale activity than a curious one-off amid investor jitters.