New Look: new management and back to older target

After 42 years, Tom Singh, founder of New Look, has stepped back into the retailer´s headquarters to take control of the day-to-day management. Up to no, Singh retained 23% of the shares and held the non-executive director title.

Reasons to Singh´s back have much to do with New Look´s private equity owners, not very happy with the second largest British retailer´s poor performance and its primary responsible, the now ousted chief executive Carl McPhail. John Gildersleeve, the group's chairman, announced his resignation at the same time, so a whole renovation of the managing board is taking place.

Singh has assumed the title of interim executive chairman until a replacement for McPhail is found. Singh, 62, is not thought to be interested in the top job himself, allegedly explained to national media.

As reported by The Guardian, the group declined to give a reason for the sudden departure of McPhail, who has several years’ experience in retail under his belt, including executive positions with Selfridges, Arcadia and Burton Group He is expected to receive a year's money as part of his departure agreement with the retailer, which is jointly controlled by private equity firms Apax and Permira.

New Look added that Gildersleeve had already informed the board of his decision to move and was leaving to "focus on his other business interests". He is non-executive deputy chairman at Carphone Warehouse. Gildersleeve's departure is understood to be, in part, because he is not doing the job he was hired to do – chair a public company – after a planned flotation was pulled at the last minute in February last year.

The management restructure came as little surprise to analysts after a terrible 18 months which saw three profit warnings and a relocation of its head office from its roots in Weymouth to London. The relocation was so unpopular that a third of the 300 staff refused to move, leaving New Look without important buying, merchandise and design personnel and forcing the group to hastily recruit 100 new staff.

McPhail acknowledged the impact of the move in November when he unveiled a 5% decline in first-half profits to £73.5m, as like-for-like sales tumbled by 4.5% in the six months to 25 September.

While analysts agreed it was a difficult market, they believed that was only part of the reason for New Look's woes. The chain has underperformed its rivals and lost almost half its value in 2010, according to SVG Capital, the listed company that is invested in the retailer through its association with Permira.

Ramona Tipnis, an analyst at Shore Capital, said: "New Look's like-for-like sales are the weakest in the market. It is a tough market, but they are underperforming, suffering a little bit more and they need to go back to basics and get their product sorted out." The UK's second largest womenswear retailer – with about 1,000 stores worldwide and about 670 in the UK – suffered by "going too young" although it is now targeting slightly older customers again, Tipnis said. This point was acknowledged by Alastair Miller, the finance director, when he revealed disappointing Christmas results. "We probably went slightly young in the ranges," he said. New design, merchandising and buying teams, he said, were "inexperienced in New Look's way of constructing ranges and buying product." Miller said New Look particularly struggled to offload its ranges of tops – some of which analysts said appeared to be targeting customers in their teens and early twenties – given that the average age of its shopper was 32.

Image: New Look SS11