New Look plans second rescue restructure in 18 months
New Look has put itself up for sale and is planning its second rescue restructure in less than 18 months as it tries to trim rents and cut debt after a slump in sales.
Meanwhile its rival River Island is preparing to cut 350 store jobs including shop managers and senior sales assistants. In an email to staff seen by the Guardian, Will Kernan, River Island’s chief executive, said the cuts were “crucial” to ensure stores remain open.
Fashion chains have been particularly hard hit by the coronavirus crisis as they were forced into months of closure during the lockdown. The cancellation of events and closures of bars and clubs has also reduced the need for new outfits, and shoppers have focused on buying essentials such as food and healthcare products.
Sales at New Look’s 469 stores since they reopened are down 38% compared with last year, and Nigel Oddy, the chief executive, said that despite strong trading online the group’s financial position had been “significantly impacted” by the pandemic. Thirty stores remain temporarily closed.
As part of the latest rescue restructure, New Look is to launch an insolvency procedure called a company voluntary arrangement, under which it will ask landlords to accept rental payments based on sales in each store. Rents based on sales in the current tough climate usually amount to a considerable cut in payments.
If landlords agree to the deal, New Look’s debt holders have agreed to lend it £40m in new funds and to swap about £450m of debt for shares in the company, reducing its total debts to £100m.
If landlords do not agree, New Look is at risk of collapsing, with the potential loss of 12,000 jobs.
A sale process has been launched as part of efforts to seek new funds but a buyer is unlikely to come forward in the current climate.
Oddy said: “I am pleased that we have now safely reopened 459 stores. However, current trading remains impacted by the decline in footfall seen right across the retail market, and with the pandemic ongoing and social distancing measures in place for the foreseeable future, it remains difficult to accurately forecast the sales recovery rate.”
He said that given the difficult trading environment and the shift to shopping online, as well as the group’s debt obligations and future expected costs, New Look needed additional cash so it could be “as well positioned as we can be going forward in the post-Covid-19 retail operating environment”.
Less than 18 months ago New Look handed bondholders up to 92% of the company in return for reducing its then £1.35bn debt pile to about £500m. As part of that deal, bondholders also put in £80m of cash.
In March 2018 the company closed 85 stores through a CVA after an annual loss of nearly £235m, which its chairman blamed on its product range becoming too young and edgy and on an ill-starred international venture.
