Another Retailer in Rescue Talks

8th March 2018.

British fashion retailer New Look plans to close 60 stores as part of a rescue deal to help it avoid going into administration.

Since December last year, the clothing retailer has been suffering from a major sales slump and has been considering a Company Voluntary Arrangement (CVA) since it announced dismal losses in January. New Look has 594 outlets in the UK and it has announced that 60 of those will be closing, ranging from the large store in Oxford Circus to Haymarket and all the way up to Aberdeen. The company has promised to redeploy workers elsewhere, but up to 980 jobs are said to be at risk. As part of the CVA, the retailer will pay lower rent on its available stores, relieving some of the financial strain.

New Look is just the latest in a long line of company insolvencies. While the clothing retailer has not called in the administrators yet, its plea for help illustrates its vulnerable position- only time will tell whether it survives the long term. At the Credit Protection Association, we help many of our members recover from sales and profit slumps, and we recommend business owners come to us first before declaring surrender.

The firm has admitted it had been struggling with its rental costs and had asked landlords for leeway so it could “restore profitably”.

It has also faced an “extremely challenging” retail market, driven by weaker consumer confidence, the implications of Brexit and competition from online channels,” said Deloitte, which is handling the firm’s Company Voluntary Agreement.

This new rescue plan, which still needs approval from creditors, will see landlords slash the rent and revise leases on 393 stores across the UK.

A glut of UK retailers has closed or gone bust in recent months amid a slowdown on the High Street.

Last week toy store chain Toys r Us fell into administration, along with electronics retailer Maplin, leaving thousands of jobs at risk.

Restaurant chains Byron and Prezzo have also announced closures, while House of Fraser is seeking to shore up its finances.

It is a tough time for retailers. If it’s not plummeting sales or the skyrocketing business rates, it is inflationary pressure scaring off their cost-conscious customers. Until the economy has settled into its post-Brexit equilibrium, businesses will continue to trade on shaky ground. However, there are ways to stop your business from going down the same road as Toys r Us and business owners must take heed. In this environment, it is important to be cautious and always consider the worst-case-scenario. Freeing up your cash flow by chasing late payers or recovering bad debt will allow your business to afford expansion, as well as the financial freedom to set some cash aside for a rainy day.

At the Credit Protection Association, our debt recovery services give our members an edge against this tough market and allow them to think ahead rather than to the administrators. Furthermore, our credit management products give our members a bit of protection. By credit checking your customers and suppliers, it reduces the risk of encountering late payments, bad debt or even insolvency later down the line. In this difficult climate, it is imperative you are prepared.

If you think you are in danger of becoming another insolvency statistic, don’t despair. If you are struggling with your cash flow and concerned for your business’ prospects, come to CPA first before you consider liquidation. We will recover bad debt, chase late payers, and give you a whole New Look!