The tills clearly haven’t stopped ringing at New Look – the fast-fashion retailer said today that its sales jumped 15% to £1.3bn in the year to March 28, while pre-tax profits were up 10% to £217.6m. After the carnage we’ve seen on the high street this year, these are pretty impressive figures, and it will allow the private-equity-owned New Look to ramp up its international expansion plans. It just goes to show: there may be a recession on, but that’s no reason for a girl to go without her skinny jeans and gladiator sandals - particularly if they’re a bargain...
New Look is apparently now the largest retailer by volume in women’s footwear, jeans and dresses, while its menswear division is growing and its website is going great guns. And it’s taking trade away from its rivals: it said today that like-for-like sales inched up 1.4% in the UK and Ireland last year, with its market share improving to 5.4% (the rest of the sales hike came from a 14% increase in retail space). Now it plans to replicate this success overseas: it already has 612 stores worldwide, including its first shop in Moscow this year, and has big expansion plans in France, Belgium, and Holland.
New Look is also one of the few success stories that the private equity industry has to shout about at the moment (and a fairly unlikely one, given how well most highly-leveraged retailers are currently doing). Buyout groups Permira and Apax Partners took the business private back in 2004, and after doubling their money via two refinancings, tried to flog it in 2007. However, with the credit crunch looming, the offers came in too low, forcing the two firms to pull the plug on the sale. If New Look can keep growing at this rate, that may turn out to have been a blessing in disguise.
In recent months, New Look has had some success in increasing margins as well as boosting sales, thanks partly to some clever stock control. So it looks to be perfectly positioned for when the economy picks up. Then again, it may be that the recession has been good for it – that it's brought about a 'flight to value', with fashion-conscious customers trading down to cheaper alternatives (Primark being another example). The question will be whether it can avoid a flight from value once these customers have a bit more money to spend, and can’t face fighting their way through the hordes of teenage girls that seem to permanently inhabit its shops...
In today's bulletin:
Don't Bank on quantitative easing, says Merkel
Network Rail keeps profits on track but misses efficiency target
New Look fashions 10% profit hike
The £0.5bn expenses bill
MT Special: Deborah Meaden talks common sense