New Looks swings to profit as turnaround bears fruit

Retailer New Look said on Wednesday that it swung to a profit in the year to date as its turnaround programme bears fruit.

Group underlying operating profit for the first nine months of the year came in at £38.5m compared to a loss of £5.1m in 2018. Core adjusted earnings before interest, taxes, depreciation and amortisation were up 75% to £97.7m, supported by cost savings, while group adjusted EBITDA was 78% higher at £79m.

Revenue declined 5% in the period to £1.02bn, in line with expectations, as the company focused on driving more profitable sales. New Look brand like-for-like sales were 2.3% lower, which was an improvement on the 10.7% drop seen in the same period a year ago. Meanwhile, third-quarter total UK LFL sales were up 0.9%, marking the third consecutive quarter of improvement.

Last month, New Look issued a profit warning as it announced a debt-for-equity swap with its bondholders to slash debt. The company said at the time that it would issue new bonds to raise £150m of new capital as it looks to cut debt by around 80% to £350m.

Executive chairman Alistair McGeorge said: "Today’s results show that we continue to make good progress in delivering improved operational and financial stability despite the challenging retail environment. Our return to broad appeal product continues to enhance profitability, our supply chain lead-times have improved, and we have exceeded our planned cost savings. However, we have more work to do and our focus is now on accelerating our turnaround plans.

"Central to this is finalising our financial restructuring, which will secure the future and long-term profitability of the company. The proposed restructuring has provided our colleagues and suppliers with renewed confidence, which will benefit the company at every level. The right capital structure and a materially deleveraged balance sheet will provide us with the financial flexibility to better attack our future amid challenging market conditions."