New Look profit slumps 40pc after prices rise
Fashion retailer New Look has admitted its performance over the past year was “disappointing” as it reported a 40 per cent slump in profits.
The privately-owned retailer said group like for like sales fell 5.5 per cent over the year – and 7.1 per cent in the UK – after price rises for its budget clothing ranges left it uncompetitive.
Operating profit fell to £98m from £162.7m in 2010, while earnings before interest, tax, depreciation and amortisation (ebitda) fell to £190.2m from £249.4m in 2010.
“Clearly these are disappointing results, reflecting a business that was suffering significant internal disruption against the backdrop of a harsh and deteriorating consumer economy,” said executive chairman Alistair McGeorge.
“Additionally, we allowed our price architecture to drift upwards, which undermined our competitiveness and relative value positioning in the marketplace.”
McGeorge joined New Look in April after both chief executive Carl McPhail and chairman John Gildersleeve resigned abruptly in March following a poor trading update.
He added that its management had begun overhauling the business to return it to sustainable growth.
“This is a business with a strong brand and fantastic people and we are confident that we have put in place the right first steps to ensure New Look is returned to sustainable growth,” he said.
However, sales at New Look’s international stores open at least a year were up 0.5 per cent, after with a 2.4 per cent rise at the half year.
Clothing retailers are struggling to pass on the soaring costs of raw materials such as cotton to cash-strapped shoppers.
Budget chains like New Look, Primark and Hennes & Mauritz have been particularly hard hit, because raw materials make up a higher proportion of prices for their products.