Analysis: Why has New Look fallen off track?

In the UK, like-for-likes slumped 4.7% in the 13 weeks to Christmas Eve, while pre-tax profit during the quarter plunged 37.6% to £30.1m.

This poor performance is more than a blip for New Look – it is the third consecutive negative quarter for the retailer.

New Look boss Anders Kristiansen – who was drafted in to turn around New Look in late 2012 – was surprisingly upbeat on results day and highlighted that the 4.6% decline in the third quarter was ahead of the 8.4% drop in the first half. “We’re moving in the right direction,” he insisted.

Regardless, New Look’s performance is out of kilter with other fashion retailers which, in large, posted growth over Christmas.

Product problems

Kristiansen said the poor performance in the UK was down to product weakness.

“We usually do this very well but we did not buy into certain trends,” he admitted.

“We could have done a much better job in denim for instance. Ripped denim became a huge trend and we lacked authority with that, and with other trends.”

“The meteoric rise of the etailers has changed the behaviour of New Look’s core millennial customer”

Retail Week Prospect analyst Wendy Massey points out how crucial remaining an authority on trend is to retailers in New Look’s pond.

“One of its core strengths over the years has been interpreting trends and making them accessible for its young customer base,” she says. “So when it gets it wrong – as it does seem to from time to time – the consequences are fairly major.

“Its customers are really fickle and there is so much choice now in the fast fashion market, that customers don’t really need to give an established business like New Look a second chance.”

New Look’s product team has been through much change in recent months. Head of design Steven Andrews and buying, merchandising and design director Emma Worley both left the business in the autumn, and the wider design team was restructured at the time, resulting in a small number of redundancies at all levels.

But, while product weakness and upheaval have played their part in New Look’s flagging fortunes, experts point to other areas of the business as cause for concern.

Changing habits

Lead retail analyst at Global Data, formerly Verdict Retail, Honor Westnedge says that New Look’s stellar online performance – website sales jumped 18.2% while third-party website sales surged 73% over the golden quarter – indicates that its woes are not all product-related.

“The problem does not lie with product,” she says. “It is the number of stores New Look operates and their lack of responsiveness during periods of unseasonal weather.”

She points out that the meteoric rise of the etailers has changed the behaviour of New Look’s core millennial customer, and that its physical store estate is less of an asset than it once was.

“Store closures, enhanced visual merchandising, increased product newness and adapting its seasonal mix and phasing is essential to return like-for-likes to growth and limit the threat of the online pure-plays,” she says.

Massey believes that New Look’s third party sales policy could well be cannibalising its own sales.

“Many retailers use third party sites because they want to test their product in new markets in a low risk way,” she says. “But that doesn’t apply here.

“I wonder if their international ecommerce strategy is coherent – many digital team members have left recently.”

New frontiers

International is, of course, a key focus for New Look, which is expanding both in Europe and further from home.

Its Chinese venture has spawned 100 stores, with like-for-likes “positive” in the region.

Menswear, another new project now in 19 standalone stores, is also a key focus for the retailer, which is tapping into a market set to beat the pace of growth in womenswear for the foreseeable future.

Massey believes that the core domestic womenswear business has suffered, with new ventures acting as distractions.

“My feeling is that they have taken their eye off the ball with key UK womenswear,”  she says. “I am really shocked by the UK results.

“I just wonder whether they’re trying to appeal to too wide a market, and losing out to more dynamic competitors.”

New Look seems certain that it has rectified its product issues and is pressing ahead with store openings, menswear and international expansion.

This gives New Look lots to do and as we have witnessed in recent quarters, keeping all balls in the air is a challenging task that can result in damaging fallout. Kristiansen will need to fine tune his juggling skills.