New Look shocks landlords with rent revolt

FASHION giant New Look is poised to trigger a massive restructuring in an attempt to reboot the chain’s finances and tear up leases weighing the business down.

The company, which has more than 10,000 staff, is expected to appoint advisers from Deloitte as soon as this week to oversee an insolvency process known as a Company Voluntary Arrangement.

It will ask landlords at more than 450 stores to accept new lease contracts that would ensure it pays rent based on how much money each shop makes. It is the first time a major retailer has demanded blanket lease contracts linked to turnover and will be closely watched by all its high street rivals.

Average spending in stores is still only around half the level of last year. Fashion chains Jigsaw and River Island are also said to be considering CVAs. Sources said that New Look had opened too many shops in the wrong places and was paying unsustainable rent.

Some landlords – accustomed to fixed rent payments, long contracts and upward-only payment reviews – have complainied bitterly about the unorthodox plan which will send a shockwave through the commercial property industry.

One rival executive source said the terms attached to the firm’s second CVA in just over two years are going to be ‘pretty blunt and pretty brutal’. But he added: ‘This is a significant moment – it’s never been tried before. Landlords will read the writing on the wall or bury their heads in the sand. But retail’s troubles aren’t going away.’

Industry sources said the proposal would put the chain on a more stable footing as it faces a highly unpredictable period.

The plan is understood to have the approval of the retailer’s bondholders – who only l ast year agreed to cut the chain’s debt by £ 1 billion – but will require substantial support from landlords to be successful.

One source said: ‘If they can get the structure of the company right, there is a good business in here and management have got the proposition in the right place. But the rent bill isn’t.

‘New Look became successful as a retailer in smaller towns and high streets and that is where shoppers in this post-Covid world are heading.’