New Look expansion focus

New Look will start a major out-of-town store opening scheme this year, launching up to 100 new stores. The retailer's management, headed by Phil Wrigley, chief executive, believes that New Look can increase store numbers from 580 to 680 over the next 12 months. Wrigley said the retailer benefits from larger store formats, which can house its full ranges of womenswear, menswear and shoes. In their January trading statement, New Look said strong Christmas performance was driven by a margin-led trading strategy. Total Group sales grew by 9.7% in the period, driven by space and range expansion in the UK and Europe. The company further reported gross profit up 4.2%, and gross margin up significantly versus the same period last year.

In anticipation of an uncertain market in the run up to Christmas, New Look said it took a strategic decision earlier this year to hold stocks tightly and consequently reduce the level of markdown. This trading strategy has been fully validated by a strong gross margin performance, which was up by over 400 bps versus the same period last year. The gross margin performance has directly benefitted profitability, and we expect good growth in EBITDA for the full year (2006/07: £176.6m). On a like for like basis, gross profit was ahead by 4.2% in the period. The decision to trade for profit over sales saw like for like sales decline by 3.4%.

In the UK, New Look has further consolidated its position as the third largest Womenswear retailer, and continues to hold the number 1 position in women's footwear. Key sales drivers in the period were denim, knitwear and outerwear. In addition, there were also good performances in the period from menswear and kidswear.

Phil Wrigley, Chief Executive of New Look commented:"We are pleased with the performance of New Look over the Christmas period. In anticipation of an uncertain UK market we executed a trading strategy of tight stocks and significantly less promotion and markdowns. Our strong gross margin performance, with a corresponding increase in gross profit, shows how successful this strategy was. Whilst we expect the consumer environment to remain challenging in 2008, we are confident that New Look will continue to gain market share and deliver further revenue and profits growth."

image: Lily Allen New Look