New Look: Profits Up, No Plans Yet To Revive IPO

LONDON (Reuters) – British budget fashion retailer New Look has no plans to relaunch its stock market flotation in the near future amid an uncertain economic environment for consumers, it said on Wednesday.

However the group, which postponed a planned stock market return in February due to volatile financial markets, said it was confident of gaining more market share as cash-strapped shoppers focus on low prices and fast-changing fashions.

Underlying operating profit rose 18 percent to 163 million pounds ($237 million) in the year ended March 27, and New Look said it took market share from more expensive rivals like Marks & Spencer (MKS.L) and Next (NXT.L) to become Britain’s second-biggest womenswear chain.

“At this moment in time, the business has got no other plans other than to continue to grow at the rate we’ve been growing,” Chief Executive Carl McPhail told reporters when asked whether it might look to relaunch an initial pubic offering (IPO).

New Look, taken private in 2004 by private equity firms Apax [APAX.UL] and Permira {PERM.UL], said in February it hoped to raise around 650 million pounds in a flotation to reduce its more than 1 billion pounds of borrowings.

But investors were wary of the plan, particularly after department store chain Debenhams returned to the stock market in 2007 laden with debt and saw its shares plunge.

Singer analyst Matthew McEachran said New Look’s results compared favourably with listed rivals, with the 18 percent rise in underlying profit outstripping increases of a 1.5 percent at M&S, 4 percent at Debenhams and 9.4 percent at Next.

New Look, which runs over 1,100 stores in 13 countries, booked an exceptional cost of 10 million pounds, including fees related to the aborted flotation.

EXPANDING IN A TOUGH MARKET

Sales at stores open at least a year climbed 1.2 percent.

That included a 5 percent rise in Britain, boosted by demand for dresses, leggings and sandals and mirroring the strong growth posted by budget chains like Primark (ABF.L) and Matalan.

Underlying international sales, however, dropped 12 percent, hit by particularly weak trading in France and Ireland.

New Look was cautious about the consumer outlook, joining the chorus of retailers warning that steps to cut government borrowing, like higher taxes and public spending cuts, might hit demand in the months ahead.

McPhail said he was resigned to an increase in VAT sales tax to 20 percent from 17.5 percent in Britain’s June 22 emergency budget, but urged the government not to implement it until next year, saying an earlier move would be an operational nightmare. 

Despite the tough economic backdrop, New Look said it would continue to open new stores, with plans to add around 200,000 square feet of selling space in Britain in the coming year, and up to 150,000 abroad, including franchised stores.

The group, which owns stores in Ireland, France, Belgium and the Netherlands and has franchise partners in Poland, Russia, Singapore and the Middle East, was in talks with potential franchise partners in Ukraine, McPhail said.

It had also made good progress in turning round its smaller Mim chain in France and Belgium, with like-for-like sales now back in growth, he added.

Finance Director Alastair Miller said capital spending would be around 90 million pounds in the 2010-11 financial year.

Net debt fell around 30 million pounds to just over 1 billion, and Miller said he expected a similar, or slightly bigger, decline this financial year.

 

New Look’s net debt as a multiple of earnings before interest, tax, depreciation and amortisation (EBITDA) had fallen to 4.1 from 4.9, Miller added.

By Mark Potter
(Editing by Michael Shields)