New Look said a difficult UK retail market and its decision to sell more full-price items led to another decline in first quarter revenue.
With consumers becoming increasingly squeezed by rising inflation due to the pound’s Brexit-driven slump, several UK fashion retailers have recently suffered sluggish sales.
Last week Next Plc (LON:NXT) said it remained cautious about the challenges retailers face as it repeated its expectation for a decline in full year sales and profit despite a return to sales growth in the second quarter, helped by warmer weather.
READ: Next shares soar as it returns to quarterly sales growth and declares special dividend
Likewise, New Look’s chief executive Anders Kristiansen expects the consumer environment to remain “fragile” and the challenging market conditions to persist into 2018.
“We will continue to manage our business prudently and focus on providing our customers with exceptional product and real value for money,” Kristiansen said.
First quarter revenue and earnings falls
In the 13 weeks ended 24 June, revenue fell 4.4% to £338.7mln from £354.2mln in the year-ago period. Consumers feeling the pinch of inflation were deterred by New Look’s decision to shun promotions and sought cut-price clothing elsewhere.
Like-for-like sales, which measure stores open more than a year, fell by 7.5%.
Adjusted underlying earnings fell 37.3% £27.2mln, driven by the poor sales performance and an investment in its strategic initiatives to improve its online offering and products.
"As expected, the UK market has remained difficult, which has resulted in a disappointing quarter of trading,” said Kristiansen.
“We have managed the business accordingly by controlling costs, tactical investment in our strategic initiatives and enhancing our product proposition.”
New Look invests in online response to competition from ASOS, Boohoo
New Look has spent £2mln more on marketing this year compared to last in recruiting social media experts and bloggers to respond to growing competition in online retail.
The company said its website is more profitable than that of rivals ASOS plc (LON:ASC) and Boohoo.com PLC (LON:BOO).
A weaker pound against other currencies resulted in £60mln to £70mln in foreign exchange charges.
The increase in costs led to a loss after tax of £15.2mln, compared to a £5.8mln profit last year.
New Look boosts design team with new recruits from Zara and Mango
To help revamp the business, the company has recruited former Zara Basic head of product Paula Dumont Lopez as its new chief creative officer, succeeding Roger Wightman. Lopez will join in September.
The retailer has also taken on Mango womenswear director Rosa Gutierrez Sanchez to boost its buying, merchandising and design departments.