Following on its announcement last month that it was closing 120 stores in China, British fashion retailer New Look on Tuesday said it may close a comparable number of locations in the U.K., too.
On the same day New Look released it first-half fiscal 2019 results, the BBC reported the fashion chain would be closing more stores than the company previously anticipated. New Look negotiated a company voluntary arrangement (CVA) in March 2018, which at the time required the closure of at least 60 stores. The agreement gave landlords and creditors the last say about which stores could be closed during the following year.
It turns out that number could be much higher.
At least 85 stores will now shut down to help boost the retailer’s profitability, with the fate of an additional 13 stores currently being negotiated with landlords. That figure could rise again when landlords of another 26 stores in which New Look has been allowed to operate rent-free over the holidays make their final decisions.
When New Look announced the initial store closures in March, it estimated a maximum of 980 employees from its current U.K. payroll of 15,300 would be let go. It is unclear how many jobs will be cut as a result of the additional closings. For now, New Look maintains 593 stores in the U.K. and several hundred more across Europe and Asia.
Those stores include its 120 locations in China, a market New Look is exiting completely, after which the company said it will review the remainder of its international portfolio to cut underperforming areas.
Alistair McGeorge, executive chairman of New Look, said he sees the better performance in the first half of FY19 as an indication the company could start to turn things around if it begins to cut costs.
“I am encouraged by our performance in the first half of the year, which reflects the progress we are making with our ongoing turnaround plans to rebuild our position in the U.K. womenswear market,” McGeorge said in New Look’s earnings report. “The significant cost savings which have been implemented are delivering improved profitability and we continue to see better performance in our new womenswear ranges.”
New Looks’ comparable sales fell 3.7 percent in the first half of FY19, but were still an improvement compared to the 8.6 percent drop in the first half of FY18. Earnings before interest, tax, depreciation and amortization of 49.8 million ($65.3 million) more than doubled last year’s count of 24.2 million pounds ($31.7 million), which the company attributed to its cost-saving strategies. New Look reported an annualized cost-savings of 70 million pounds ($91.7 million) in the first half, with another 8 million pounds ($10.5 million) identified for future savings.
“We continue to work hard to accelerate our progress, but we are facing into significant headwinds and uncertainties, including Brexit. Clearly, the wider retail environment remains challenging and we are not expecting that to change anytime soon. However, we are on the right track and continue to drive further efficiencies across the business,” McGeorge said. “As we look to the second half, our focus will be to continue to improve our financial and operational stability and further capitalize on our brand strength to position us well for the future.”