New Look aiming to cut its rent to zero on 68 stores in drastic plan to rescue ailing fashion chain and 11,200 jobs in wake of Covid-19 outbreak
New Look is aiming to cut its rent to zero on 68 stores in a drastic plan to rescue the ailing fashion chain and 11,200 jobs in the wake of the Covid-19 outbreak.
The brand published proposals for a controversial restructuring programme which will slash rents and pave the way to shrinking its debt.
The plans rely on landlords agreeing cuts to their income. Under the proposals, 402 New Look stores will pay rent based on turnover. Another 68 will pay no rent.
Controversial: The New Look brand has published proposals for a restructuring programme
New Look will still pay business rates and service charges on these stores.
It said sales in its stores are still 35 per cent to 38 per cent lower than before lockdown.
The chain has already secured a £440m debt-for-equity swap, a new £40m cash injection and an extension of its loan agreements to at least 2023 to provide it with financial stability for post-Covid trading. These will be put in place if 75 per cent of landlords and creditors vote for the company voluntary arrangement (CVA), the insolvency procedure being used, on September 15.
It is the first time a chain of this size has asked for rents based on takings. It follows a separate New Look CVA in 2018 which led to around 60 stores closing.
The firm says the latest proposals are ‘absolutely necessary’ and the deal will save 11,200 jobs. No stores will close, although landlords retain the right to replace New Look with another shop willing to pay more.
Chief executive Nigel Oddy said: ‘We recognise this has been flipping tough for landlords, and we have listened to them. We’ve had a big tick from the banks and bondholders.
‘We just need this third part of it to secure a future for a business which has 11,200 colleagues.’
The firm hopes that lower costs, combined with a trend towards shopping in stores nearer to home, will secure its future.
CVAs were rare before the pandemic as they are usually only open to the most distressed companies, but the crisis has pushed a number of household names to shut stores and slash rents.
Jigsaw, Pizza Express, All Saints, Frankie & Benny’s and Yo Sushi have all said they will use CVAs to rescue their businesses, leading to hundreds of store closures and thousands of job losses.
The Centre for Retail Research said more than 20,000 shops could close this year, costing 235,000 retail jobs.