Struggling fashion retailer New Look’s South African owner, Brait, is working with CBRE and Deloitte on the future of the retailer’s estate.
The fashion chain is in the middle of a turnaround plan and is currently considering a CVA, which could see it close around 60 of its 600 UK shops in its 7m sq ft estate. A CVA would have to be approved by creditors and a decision is yet to be agreed.
If store closures go ahead, then the most likely properties to be axed from the portfolio would be the brands larger, standalone high street formats, some of which are as large as 50,000 sq ft.
One landlord exposed to the troubled retailer said: “From what we understand, in essence the strategy is to get the overall rent bill down. It will more likely be around 50 shops, the majority of which will be its standalone stores on high streets, then shopping centres as well as a few closures in retail parks.”
The landlord added that it would also be looking to downsize through reshaping and repositioning its portfolio.
“It is not a large number of net closures and it has been a while since they closed anything so it is about time that they did.”
The average size of a New Look store is around 7,600 sq ft with a rent of around £20 per sq ft, equating to an annual average rent across its estate of around £240,000 pa.
Although no store closures have been identified at this stage, some of the larger, standalone stores in its portfolio which could cause concern include Sterling, Wrexham and Reading.
The larger stores, which can extend to 50,000 sq ft, could be problematic to re-let. These stores are in a similar size range to BHS, of which there are still around 96 vacant stores in its 160 strong estate since the business collapsed in 2016.
However, growing demand from expanding fashion retailers such as H&M and Primark could be suitable new tenants for high street and shopping centre space. The brands only have 300 and 174 stores in their portfolios respectively in comparison to New Look, which has 600, however they do have a preference for larger towns and cities meaning that vacant units in smaller provincial towns could suffer.
New Look is struggling with a £1.2bn debt pile in addition to its £10.4m loss in made in the six months to September and like-for-like in store sales fell by more than 8%.
Online sales have also declined by 7.6% in the period, suggesting that the business also needs to work on its product range.
Honor Strachan, principal retail analyst, GlobalData, said that this result is “pretty disastrous”.
She added: “It comes down to brand relevance. They have not reacted fast enough to other fashion players. It doesn’t know who it is targeting and its core customer is ageing and choosing more relevant brands such as Zara.”
The CVA lifeline has been viewed as a controversial survival technique for ailing retailers, with a string of historic failures casting a detrimental light on the process. In order to succeed there needs to be a viable business plan in place. “It is not without risks,” said one landlord.
Whether or not a CVA goes ahead, it has been suggested that store closures should be included in the turnaround plan regardless.
Strachan added: “Maybe this is a starting point and they will choose to get out of what they can quickly in terms of the leases, but they should be looking at a far more rigorous closure programme.”
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