New Look falls into the red amid tough fashion market

New Look is seeking to reduce its dependence on the UK high street. Picture: New Look/PA Wire

The fashion retailer also said it expected trading to remain under pressure into 2018 as it posted a 60.3 per cent year-on-year plunge in underlying operating profits to £12.1 million for its first quarter to 24 June after UK like-for-like sales slumped 7.5 per cent.

On a bottom-line basis, the group fell into the red with losses after tax of £15.2m against profits of £5.8m a year earlier.

New Look, which has 54 stores and just over 1,200 staff in Scotland, blamed tough conditions on the high street, but its ranges are seen as

having missed the mark in recent months.

Chief executive Anders Kristiansen said: “As expected, the UK market has remained difficult, which has resulted in a disappointing quarter of trading. We expect the consumer economy to remain fragile and challenging market conditions to persist into 2018.”

The group is overhauling its clothing ranges and hiring new chief creative officer Paula Dumont Lopez, who is due to start in September.

New Look, owned by South African investment group Brait, was founded in 1969 as a single fashion store in the UK. It now has 890 branches, including 593 in the UK.

Kristiansen said: “We remain committed to our long-term strategy of diversifying the business and reducing our dependence on the UK high street, and are confident that we will see improvements, but expect these to take time.”

The group saw website sales fall in the quarter, down 0.6 per cent, while overall brand sales dropped by 8.2 per cent.

Its new website went live yesterday and it has expanded its menswear stores to 22, including a standalone store on Glasgow’s Buchanan Street that opened in June.

In addition, it is trialling new shops, with a flagship outlet set to open on Oxford Street in November. Kristiansen said it is “pleased” with its continued growth in China, with another 17 stores opened, taking the total to 127.

The chief executive admitted the group’s store product is “not where it should be”, which had compounded the hit to consumer confidence from Brexit and the impact of the weak pound.

Kristiansen said: “It has been tough out there for most companies and that’s what we have seen ever since Brexit but on the other hand we don’t think we have delivered as good a product as we could have.”

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The pound’s plunge since the Brexit vote has also hit its profits, as New Look has cut prices on its key lines while seeing buying costs soar.

Kristiansen said he hoped the arrival of Dumont Lopez, who has held senior roles at Zara owner Inditex and Esprit, would help spur the chain’s turnaround. He said the group “believes very much” in its UK store estate, with 98 per cent profitable, but keeps it under review every quarter.

Having spent £100m over the last three years on systems and a new website, Kristiansen added that New Look continues to “invest heavily in this business”.

He also said that, amid the difficult backdrop, the retail chain “will continue to manage [its] business prudently”.

• Fast-growing online retailer Asos is to ramp up its American offering by spending $40m (£30m) opening a new factory in the country, writes Martin Flanagan.

The order fulfilment centre in Union City, outside Atlanta, is expected to be operational by next year and Asos said it will help the business to make further inroads into the market for young shoppers Stateside.

The company said the development will “significantly enhance” its US proposition by providing more cost-effective, faster and more flexible delivery options.

Asos currently has a small fulfilment centre in the US which manages 25 per cent of all orders there, with the remainder being dispatched directly from the UK.

The new ten million unit capacity facility is part of the retailer’s strategy to refocus on the core markets of the UK, Europe and the US.

Asos chief executive Nick Beighton said: “This agreement is a major step forward for Asos in the US and demonstrates the opportunity we believe lies ahead in this key market. Our US fulfilment centre will enable us to significantly develop our proposition for our 20-something US customers supporting our continued growth and future ambitions.”

The firm’s US business delivered 39 per cent constant currency revenue growth in the first six months of 2017 following sales of £179m in the year ended August 2016.

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