New Look proposes CVA to secure store model

New Look has today launched a company voluntary arrangement (CVA) proposal as it looks to secure the long-term future of its stores in light of changing consumer behaviours during Covid-19.

The womenswear brand is now seeking approval from its landlords and unsecured creditors to reset 402 of its UK stores to a turnover rent model, which “aligns future performance and reflects the wider retail market”.

Under the proposal, 402 of its stores’ leases would be set at a turnover percentage of up to 12%, while the remaining 68 stores would move to nil rent. Landlords would be provided with more breaks for all stores, giving them the opportunity to exit the lease if they believe they can identify an alternative tenant on improved terms.

New Look said the change to how the leases are structure is necessary due to the “magnitude and speed of consumer behaviour and confidence” during the ongoing Covid-19 pandemic, helping manage uncertainty and “ensure continued business viability”.

Nigel Oddy, chief executive officer at New Look explained: “We are launching this CVA out of absolute necessity and are calling on our landlords to agree a turnover rent model for our stores which will put us into a position to be able to complete a financial restructuring agreed with our creditors that will secure the future of New Look and our employees. The proposal to landlords is to rebase our rental cost base through a turnover-based model that aligns future performance and reflects the wider retail market.

“Covid-19 has changed the retail environment beyond recognition, accelerating the permanent structural shift in customer spend and behaviour from physical retail to online, which we have seen in recent trading. Despite this, we still fundamentally believe the physical store has a significant part to play in the overall retail market and our omnichannel strategy. We remain committed to the high street and serving our customers through our portfolio of local, conveniently-located stores in towns across the UK.”

The CVA meeting date is scheduled for 15 September and requires at least 75% of the unsecured creditor votes to be in favour for the proposal to pass.

Daniel Butters, partner at Deloitte, the company appointed to act as Nominees to the CVA, said: “The retail trading environment in the UK has been under pressure for some time, driven by weaker consumer confidence and competition from online channels. Covid-19 has increased these challenges and accelerated the shift in customer spend from physical retail to online.

“The turnover rent model better aligns the risk and reward of trading during these uncertain times and the CVA, together with the wider-balance sheet restructuring, provides a stable platform upon which Management’s strategy can be delivered. We have fully engaged with the British Property Federation and its members and their views are reflected in what we believe is a fair proposal to restructure the property obligations of the Company.

“It is important to stress that no stores will close on day one, and employees and current suppliers will continue to be paid on time and in full.”