Although the resolution of the Eurozone Crisis has eased the financial pressure upon continental consumers, the situation prevalent in the UK retail industry – whereby consumers are wary of excess spending – remains true overseas. This has taken a huge toll upon the annual profits of fashion chain New Look, which has this week revealed a £55 million pre-tax loss largely due to the challenges facing its French business.
The reason for the concerning loss, according to chief executive Anders Kristiansen, was the £64.2 million write down of the French Mim chain which currently has 356 stores in operation throughout the country. Although Mr Kristiansen claims that the past two months have seen trading in the French arm pick up, New Look owners Apax and Permira, along with founder Tom Singh, are reportedly examining whether a sale of the business would allow the group to progress growth in other key markets.
One of these markets would undoubtedly be the UK, as the latest report also showed that like for like sales in the country had increased by 2.2 per cent in the year to the 29th of March. In part, this is due to the extensive store renovation programme undertaken by the retailer towards the end of the recession, which saw fitting rooms upgraded and layout improved to enhance the consumer experience.
Furthermore, when questioned whether future UK store openings are on the cards, Mr Kristiansen seems determined to capitalise on any arising opportunities.
“We see an opportunity to grab more space,” he told The Guardian.
“There are a number of cities where we have smaller stores, where we could do with bigger stores.
“We believe in being in smaller cities because it drives e-commerce.”
The push to enhance multi-channel offerings has also paid off well for New Look, with the revamp of its website and apps contributing to a 64 per cent increase in online sales.
Between the online and bricks and mortar operations, New Look now controls a 6 per cent market share in the UK clothing sector – a figure which Mr Kristiansen is adamant to increase in future.
Clearly, then, the main factor holding back this otherwise extremely positive set of results is the Mim unit of the business.
New Look is currently seeking to expand internationally, especially in emerging markets such as China and Russia – in fact, 10 new Chinese stores are set to open in the near future – so the sale of Mim, or even its property portfolio, could provide valuable funds for a large-scale investment which would see the retailer keep pace with rivals such as H&M and Zara. However, the sale would also remove New Look from the French market entirely; not an ideal situation as spending amongst northern European consumers continues to rise.
Fortunately, with UK like for like sales on the rise and internet sales dominant, New Look certainly has the breathing space to sit back and consider the future of the Mim business.
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