The struggles of well-known high street stores has hardly been out of the news since the New Year.
After the closure of Woolworths, Comet, JJB Sports and British Home Stores (to name a few), the steady decline of the high street since the 2007/2008 recession is something that the UK public are only too aware of.
This year, with Toys R Us and Maplin falling into administration on the same day at the end of February, the impact of the battle between the physical high street and online shopping was once again highlighted to the public.
Now, not even two weeks later, major UK retailer, New Look, is also in financial difficulty (notably, despite having a strong online presence).
Mr McGeorge, New Look’s executive chairman, stated that the retailer had in the last year “put up the prices on average about 13 percent”, which, amongst other things, has led to New Look’s sales falling from a profit of £29.2m in 2016 to a pre-tax loss of £123.5m in 2017.
New Look is currently seeking agreement from its creditors to a restructuring plan which includes the closure of around 60 stores and redundancies of around 1,000 of the retailer’s 15,300 UK employees. It is also requesting rent reductions and new lease terms for 393 of its 593 stores.
Watch this space – the creditors will decide whether or not to agree to New Look’s proposed CVA on 21 March 2018. As such, all New Look stores will be remaining open until that date.
There can be no doubt that the fashion retail market – especially in New Look’s price range – has a fast-growing online presence with many retailers operating exclusively on an online basis. This will inevitably decrease sales on the high street and make it more difficult for shops to survive. It remains to be seen whether the reduction in rents and other compromises will be sufficient to save the retailer in this case (if the CVA is indeed approved by the creditors).
Alexandra is Vice-Chair of R3 North East and an Associate Solicitor at Short Richardson & Forth.