New Look warns of 'fragile and challenging' retail environment as profits drop

Paterniano Del Favero
Agosto 9, 2017

With consumers becoming increasingly squeezed by rising inflation due to the pound's Brexit-driven slump, several United Kingdom fashion retailers have recently suffered sluggish sales.

Fashion chain New Look has warned of a "fragile" retail environment stretching into next year as it reported a 60% fall in quarterly profits amid a sharp downturn in sales. Consumers feeling the pinch of inflation were deterred by New Look's decision to shun promotions and sought cut-price clothing elsewhere.

Profitability was hit in the quarter with EBITDA down -37.3% to £27.2m due to the challenging market and investments made in strategic initiatives.

Anders Kristiansen, chief executive, admitted that it was a "disappointing quarter of trading" and said that "product could be better".

"We have managed the business accordingly by controlling costs, tactical investment in our strategic initiatives and enhancing our product proposition", Kritiansen said.

Mr Kristiansen said that New Look's website was more profitable than that of its pure-play rivals, such as Asos and Boohoo.

New Look has spent £2mln more on marketing this year compared to last in recruiting social media experts and bloggers to respond to growing competition in online retail.

A weaker pound against other currencies resulted in £60mln to £70mln in foreign exchange charges.

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.

Kristiansen said the business would be bolstered by the arrival of new chief creative officer Paula Dumont Lopez, former head of product at Zara Basic, next month and that it was "pleased with our continued expansion in China", where it had opened another 17 stores taking the total number to 127.

The retailer has also taken on Mango womenswear director Rosa Gutierrez Sanchez to boost its buying, merchandising and design departments.

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