New Look issues profit warning, outlines restructuring plans

Struggling fashion retailer New Look issued a profit warning on Monday and announced a debt-for-equity swap with its bondholders as it looks to slash debt.

The company said it will issue new bonds to raise £150m of new capital as it aims to cut its debt by around 80% to £350m. Providers of the new money bonds will receive 72% equity in the group.

It also issued an update on its financial performance to date, saying that headwinds increased in late November and December, driven by a drop in footfall and subsequent increase in promotional activity, which meant total UK like-for-like sales fell 5.7% last month.

New Look said the drop in total UK sales was further impacted by the loss of stores as a result of landlord enforced closures from the CVA.

It now expects earnings before interest, tax, depreciation and amortisation for FY19 to be around £84m for the core UK business, while the non-core business is expected to make an EBITDA loss of £27m, coming in below the company's initial forecasts.

Executive chairman Alistair McGeorge said the debt restructuring agreement represents "a critical step" in New Look's turnaround and lays the foundations to secure the future and long-term profitability of the company by materially deleveraging its balance sheet and providing financial flexibility.

"Over the past year we have made significant progress with our wider turnaround plans to rebuild our position in the UK womenswear market and recover the broad appeal of our product whilst implementing significant cost savings and efficiencies," he said.

"However, it has been clear for some time that the group’s existing level of indebtedness has been constraining our ability to accelerate our turnaround plans and would continue to limit our growth in the future.

"Therefore, today marks an important milestone for the business, our colleagues, our suppliers and all our other stakeholders. A materially delevered balance sheet and a more flexible capital structure will allow us to better navigate the challenging market environment and create a stable operating platform so that we can achieve further progress against our turnaround plans."