New Look cuts its debt by £1bn

NEW Look has announced plans to slash its debt by £1billion in a deal handing control to its lenders.

Under the restructuring, the fashion chain’s debt will be reduced from £1.35billion to £350million and it will also seek to raise £150million by issuing new bonds.

Shares in its South African owner Brait, which will see its 90 per cent stake reduced to 18 per cent, lost more than a fifth of their value in the latest attempt to bolster the business amid weakening high street trading conditions.

New Look has already closed nearly 90 of its 600 UK stores and exited China in recent weeks. The latest move is set to be completed between April and June.

The need to cut its borrowing was highlighted by a trading update showing UK sales at established stores falling by 5.7 per cent in December. Projected annual pre-tax earnings of £57million are below initial forecasts. Nearly £80million of cost savings have been identified and actioned for this year.

New Look executive chairman Alistair McGeorge said: “Today’s agreement represents a critical step in our turnaround plans and lays the foundations to secure the long-term profitability of New Look.

“It has been clear for some time that existing level of debt has been constraining our ability to accelerate our turnaround and would continue to limit our growth. A more flexible capital structure will allow us to better navigate the challenging market environment and create a stable operating platform.”

Meanwhile, fashion and homewares retailer Matalan hailed a “strong” third quarter and festive trading period after increasing quarterly sales by 4.9 per cent to £308.3million, but pre-tax earnings fell £4.9million to £40million as it faced currency headwinds.

CEO Jason Hargreaves said: “In the run-up to Christmas the market became increasingly distressed and we benefited from a planned increase in our promotional sales mix.

“Although cautious for the year ahead in what we expect to be a very tough market, our approach is clearly working.”

Digital retailer Shop Direct, the owner of Littlewoods.com and very.co.uk, increased sales by 3.7 per cent in the seven weeks to December 28, with clothing and footwear the standout product category.