New Look FY17 figures hurt by UK trading conditions, womenswear weakness
Full year sales and profits at New Look were hit by the challenging trading conditions in the UK, a general weakness in its core womenswear product and the highly promotional retail environment, leading to “disappointing” results in the 52 weeks to 25 March, announced the retailer on Tuesday.
The high street clothing company is the latest to fall victim to the difficult retail condition in the UK, which coupled with lower consumer confidence and the deprioritising of clothing purchases, sent revenue down 2.4% to £1.45bn.
On a like-for-like (LFL) basis, sales declined 6.6%, compared with an increase of 3.6% in 2016, driven by sluggish performance across the UK and Europe, partially offset by positive performance online and China.
In the UK, LFL sales (including stores end e-commerce) were down 6.8%, as the company struggled to capitalise on product trends like ‘see now, buy now’. New Look brand LFL sales dropped 6.6%.
New Look’s own e-commerce channel performed better, with sales increasing by 14.3% to £230 million. E-commerce now accounts for 15.6% of total sales, up 2.3% on last year’s share. The retailer said growth was driven by continued investment in its website and app’s design, content and functionality.
Meanwhile, third party e-commerce sales jumped 30.9% to £63.1 million as the company continued to work with its strategic partners (Asos, Zalando and Amazon EU) who benefit from being internationally diverse, to get access to new territories and further extend its global reach.
The weak sales performance and investment in strategic initiatives resulted in adjusted EBITDA decreasing by 31.8% to £155 million.
Landing key product at the right time
New Look said it struggled during the year to meet the increasing ‘buy now, wear now’ demands of its customers, a trend that is growing due to social media and changing shopping habits. “Additionally, some of our core Womenswear product simply wasn’t strong enough this year,” said CEO Anders Kristiansen in a statement.
“We’ve responded by improving our buying processes, working to achieve an even faster supply chain and strengthening our Buying and Design teams to make sure we deliver a stronger product proposition.”
During the year, the plus-size womenswear range (formerly known as Inspire) was rebranded as Curves to give the category a more clear direction, and the launch of new Beauty destination areas in stores broadened the product offering to include body care and beauty accessories.
The company also remains committed to strengthening its presence in the menswear arena by launching new dedicated men’s stores across the UK and expanding its product proposition. In addition to relaunching the men’s underwear and tailoring ranges, the retailer debuted a new men’s grooming range and created a new active wear range. It said these initiatives helped it grow its share of the UK menswear market.
Increasing its international footprint was also a key focus for New Look in FY17 with new stores opening in China and Poland, the launch of dedicated international websites in France and Germany and the introduction of a new loyalty programme for Chinese customers.
New Look has now 110 stores trading in China, where it sees “huge potential” for the business due to the country’s rising demand for fast fashion fuelled by increasing urbanisation and social mobility. In the three years since launching the first store, New Look has evolved and refined a China-specific store model, which is now being replicated and rolled out.
In France, the company has 30 stores and continues “to see a clear appetite for our ranges despite challenging market conditions.” In Poland, New Look increased its store estate with a new flagship in Warsaw, while Germany has been identified as a key future market.
The fashion brand expects the challenging retail environment in the UK to continue into FY18, but reassured investors of its confidence in the strength and appeal of New Look.
The business will continue investing across its strategic initiatives across brand, multichannel, international, menswear and gross margin and plans to enhance its distribution and IT infrastructure to support its growth.
“We expect trading conditions for the coming year to remain challenging. We remain resolutely committed to delivering on our strategy for the benefit of all our customers and stakeholders and are confident we have the right strategy in place to do so,” said its CEO.
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