New Look has reported excessive losses and is struggling badly after heavy discounting took its toll on the fashion retailer with stores set to close as they focus on “reducing costs” whilst they consider restructuring options, including a Company Voluntary Arrangement which is an agreement an insolvent company makes to pay its debts over time and to close loss-making stores or agree to lease cost reductions with landlords., they can only be obtained by working with a specialist insolvency practitioners.
We’re only 17% through 2018 and already, companies are announcing profit warnings, job losses, closures and bankruptcies. Late last year, we witnessed Toys R Us file for bankruptcy protection in the United States and in the final week of 2017, it was announced 26 store closures which will result in 800 job losses throughout the UK. More recently, Carillion tripped and has subsequently delayed the construction of hospitals in the North as well as numerous other government projects across the country, the full list of Carillion businesses that went under as a result is;
- Carillion Plc
- Carillion Construction Ltd
- Carillion Services Ltd
- Planned Maintenance Engineering Ltd
- Carillion Integrated Services Ltd
- Carillion Services 2006 Ltd
- Carillion LGS Ltd
- Carillion Asset Management Ltd
- Carillion Energy Services Ltd
- Carillion Fleet Management Ltd
- Everprime Ltd
- Postworth Ltd
- TPS Consult Ltd
- Carillion Specialist Services Ltd
- Carillion Utility Services Ltd
- Carillion AM Government Ltd
- Sovereign Hospital Services Ltd
Already, nearly 800 people have lost their jobs and more job losses are expected as 30’000 small to medium-sized businesses lose out on accumulatively £1bn from contracts already paid for, of which, the majority of this will be written off as bad debt as the company is liquidated.
Now, nearly a year after NEXT Plc issued their profit warning (which they have since lifted), New Look is following suit with pre-tax losses amounting to £123.5m. This announcement comes at the same time as they announce their consideration of closing 60 of their 594 outlets with like for like sales falling 10.7% in the three quarters to December 2017 whilst their chairman Alistair McGeorge says “We are focusing on reducing costs”.
We are focusing on reducing costs…
But is reducing costs the least of New Looks worries?
According to Mintel, “while womenswear is struggling, menswear is driving growth and sales of men’s clothing are rising at a faster rate than women’s clothing, driven by a growing interest in fashion and grooming among men. Young fashion retailers that have previously focused mainly on women are experiencing a real shift in shopping habits, with a decline in young women shopping and a big increase in young male shoppers. Retailers such as New Look, H&M and River Island are responding to this increase in male shoppers and are adapting to the new reality by dedicating more store space to men, launching standalone menswear stores and with a wider range of men’s clothing, footwear and accessories. However, this change in demographics buying clothes has huge implications for the fashion sector and retailers that have previously focused on women need to move fast to capitalise on the rise in young male shoppers and to make up for the decline in young female shoppers.” Elsewhere, Mintel also said; “In response to men showing a greater interest in their appearance, retailers are expanding menswear ranges, and more designers are debuting men’s clothing collections. As a result, the menswear market is reaping the rewards and growing at a faster rate than womenswear.”
Whilst a quick visit to the New Look Fosse Park store will reveal that they have completely removed their men’s section! Upon questioning, we are informed this is because more and more consumers are shopping online. However, we know the opposite to be true of men, especially. You see, women are shopping for clothes online more and more as companies adopt easy-returns policies, often covering the cost of returns so the customer doesn’t have to. As such, the female consumer is spending more time shopping for clothes online.
On the other hand, where it used to be a case of the wife would go shopping, they would pick a “little something” up for their other half, as such, brick and mortar fashion retailers would try to appeal to the female shoppers’ interests whilst squirreling the men’s section away at the back of the store, upstairs and as stated above by Mintel, men are purchasing for themselves more as they take greater care in their appearance so this tactic of using a small menswear section and an expansive womenswear section to appeal for the female consumer simply isn’t going to work.
Last year, when we visited NEXT in the Highcross, Leicester, we were astonished to see that, when walking past the store, it wasn’t clear as to whether or not they even had a men’s section; the first two floors (accessible from the lower and upper mall) features prominently women’s and kid’s clothing whilst the men’s is right upstairs, on the top floor, with no access from the mall. For a disabled man to go shopping for clothes in Next, Highcross, they would have to enter next, navigate to the lift (through all of the women’s clothes) and then go upstairs to the men’s. This is the case with the majority of brick and mortar fashion retailers. This is why Next issued their profit warning last year and it is clear to us that this is the reason New Look are facing such massive losses.
When we take all of this into account, it is difficult to believe reducing costs is going to solve the problem.
Reducing costs won’t solve the problem.
Going back to the example of Next, their prospects were dim should they continue to focus on their Brick and Mortar strategy and as such, they realised the focus for them should be online. Because of this, their online Directory business reported a 5.7% increase in sales whilst they concur that the “high street looks as challenging as ever”.
Neil Wilson, a senior market analyst for ETX Capital, said “Within 10 years 72% of the group’s leases by value will have expired,” which makes us question what Next’s next move will be for their 594 stores in the UK. This is a problem experienced by several high street retailers, long-term, costly leases whose return on investment is falling as the modern consumer moves towards doing the majority of their shopping online.
So, what is the solution for New Look? They have two blindingly obvious options beyond reducing costs; on one hand, they could take inspiration from Next and develop and focus on optimising their online strategy in the hopes they can imitate Next’s results.
On the other hand, they can do what Next have failed to do so far and pay extra attention to their in-store men’s ranges (this will mean reinstalling the menswear section in the New Look Fosse Park store), making them more prominent and appealing to the male consumer whilst moving their womenswear sections online.
Is New Look Closing In Leicester?
As New Look considers restructuring their business, applying for a CVA and reducing costs, it’s difficult to tell what New Look’s next move will be regarding their Leicester stores. The future is certainly dim as they weigh up their options. We expect to see the Fosse Park store close,
It is not known which stores would be closed. New Look has several outlets throughout Leicestershire including;
- New Look Haymarket Towers,
- New Look Highcross,
- New Look Fosse Park,
- New Look Beaumont Leys,
- New Look Loughborough,
- New Look Coalville,
- New Look Ashby,
- New Look Hinckley, and;
- New Look Market Harborough.
The other week, The Mirror Online reported that credit insurance had been withdrawn by Euler Hermes to many of New Look’s key suppliers meaning the company could be forced to pay for products up-front which will take a further toll on New Look’s cash flow.