Cost cutting helps New Look slow decline in like-for-like sales after China exit

Retailer New Look slowed its decline in like-for-like sales amid challenging conditions on the high street, it said this morning.

The company has said it will consider its position in markets abroad following a decision to pull out of China by the end of the year.

In the UK, New Look is closing 85 stores, with the future of 13 more being negotiated with the landlords. 

The figures

Revenue dropped 4.2 per cent to £657m in the first half of the financial year, in line with expectations.

However, the company slowed decline in like-for-like sales to 3.7 per cent from 8.6 per cent in the first half of last year.

Cost savings allowed the company to grow its adjusted earnings to £50m.

Why it’s interesting

Facing tough conditions, New Look hopes a £78m cost saving scheme could help boost profitability.

It aims to rebuild its position in the UK womenswear market, but is reviewing its operations abroad.

The chain said in March it was looking to close 60 stores. However landlords forced the closure of a further 25 as the company went into a restructuring process.

It is also in negotiation over what to do with 13 more stores, while 26 are trading on a rent-free basis, meaning landlords have the right to end the leases.

The fashion retailer, popular among teenagers, said last month it would pull out of China, closing 120 stores after a slow rollback in the country.

The Chinese business has performed below expectations, the company said, and cannot justify the significant future investment needed to keep it afloat.

In the UK, click-and-collect services increased 41 per cent, compared to 28 per cent last year, helping to drive customers into stores.

What New Look said

Executive chairman Alistair McGeorge said: “I am encouraged by our performance in the first half of the year, which reflects the progress we are making with our ongoing turnaround plans to rebuild our position in the UK womenswear market.

“The significant cost savings which have been implemented are delivering improved profitability and we continue to see better performance in our new womenswear ranges.

“We continue to work hard to accelerate our progress, but we are facing into significant headwinds and uncertainties, including Brexit.

“Clearly the wider retail environment remains challenging and we are not expecting that to change anytime soon. However, we are on the right track and continue to drive further efficiencies across the business.

“As we look to the second half, our focus will be to continue to improve our financial and operational stability and further capitalise on our brand strength to position us well for the future.”