British fashion chain New Look aims to shut up to sixty stores, possibly eradicating 1,000 jobs, in its home territory. This way, it aims to avoid a possible slide into bankruptcy.
High rental costs
New Look revealed lackluster annual results last month and there had been rumours ever since that the chain was looking for ways to lower costs and that it could possibly restructure.
The chain currently has 593 stores in the United Kingdom and aims to shut down about 10 %. Three of those are in the heart of London, including two flagship stores in Oxford Street. The goal is to lower rental costs, which is also why it will re-examine 393 stores’ rental agreements. No more than 980 people should lose their job (out of a workforce of 15,300). The company says it hopes to keep as many of those 980 people occupied within the company.
“Given our challenged trading performance and over-rented UK store estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability,” New Look executive chairman Alistair McGeorge said. “We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal.”
Analysts fear that a closure of sixty stores will not suffice to get New Look back on track. “The plan to shut down only 10 % of British stores is insufficient and New Look needs to look at its oversized store network, because that places a far too great burden on the company”, GlobalData retail analyst, Charlotte Pearce, said. “A smaller store network will increase profit per store and create a more constant brand image, which is what the retailer needs to survive.”