LONDON — The British high street is fast becoming a boulevard of broken dreams with rising rents, company failures, struggling retail chains and increasingly wary shoppers. The latest company to sound alarm bells is fast-fashion retailer New Look, which on Wednesday said it was seeking to close 60 stores with a potential for up to 980 job losses. A further six stores, which are sublet to third parties, may also close.
New Look employs 15,300 people and has a network of 593 stores in the U.K.
The company is seeking approval from creditors on a plan to improve its operational performance. New Look said it wants to reduce its U.K. store estate and its rental costs amid “challenged” trading performance and a difficult retail environment.
The proposal also includes a plan to reduce rental costs and revise lease terms across the entire retail network. With regard to layoffs, New Look said all efforts would be made to redeploy colleagues within the business where possible.
The online sales channel will be unaffected by the proposed changes, the company said.
“Given our challenged trading performance and over-rented U.K. store estate, we are having to take tough, but necessary, actions to reduce our fixed cost base and restore long-term profitability,” said
“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our proposals. A priority for us is to keep all potentially affected colleagues informed during this difficult time.”
In the first nine months of fiscal 2018, New Look’s revenue was down 6.3 percent to 1.07 billion pounds while pre-tax losses were 123.5 million pounds. Underlying operating loss was 5.1 million pounds.
Daniel Butters, partner at Deloitte, which has been advising New Look, said the retail trading environment in the U.K. remains “extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels.”
He said the restructuring, if approved, should provide a stable platform upon which management’s turnaround plan can be delivered.
“We have fully engaged with the British Property Federation and its members and their views are reflected in what we believe is a fair proposal to restructure the property obligations of the company. It is important to stress that no stores will close on Day One, and employees, suppliers and business rates will continue to be paid on time and in full.”
New Look, which designs and sells men’s and women’s apparel, footwear and accessories, said it is the U.K.’s number-one retailer for women under 35, based on Kantar Worldpanel data from 2017.
It has a total of 906 stores, with 313 outside the U.K. It delivers to more than 120 countries worldwide.
U.K. heritage brands and fast-fashion retailers alike have been hit by a perfect storm of factors, which include the shift to online retail and the weakness of the post-Brexit referendum pound, which has weighed on companies’ sourcing costs. On Feb. 28, the British arm of Toys ‘R’ Us and the electronics store Maplin both shuttered as a result of the market pressures.
Earlier this week, House of Fraser confirmed that its owner Sanpower was in talks to sell a 51 percent stake in the department store chain to Wuji Wenhua, a tourism development company.
According to British media reports, House of Fraser had been asking for rent reductions on some of its 59 stores and earlier this year the retailer lost its credit insurance.