New Look has had its company voluntary arrangement (CVA) seeking to move over 400 of its stores on to turnover-based rents approved by creditors, saving over 11,000 jobs.
The retailer said the CVA had “been approved by the requisite majority” of more than 75% of creditors, including a swathe of disgruntled landlords, at the vote which took place on the proposed measure today.
Along with moving 402 of its stores over to turnover-based rent agreements of up to 12%, the passage of the CVA means that New Look has also completed a contingent debt-for-equity swap, reducing debt from over £550m to around £100m.
The retailer has also agreed an extension on its primary working capital facilities with its lenders and a cash injection of £40m to support its turnaround plan.
Despite the approval other retailers should not expect landlords to agree to turnover-linked rents.
Chloe Collins, Senior Apparel Analyst at GlobalData, a leading data and analytics company said: “Approval of New Look’s CVA will set a precedent for other retailers to suggest turnover-linked rent agreements for their struggling estates in the wake of COVID-19. However New Look is such a big player in the market and would, upon collapse, have left over 400 empty stores on high streets and in shopping centres, so smaller retailers must think twice before assuming similar CVA’s would be approved, given they may not be as important to landlords.
“With New Look now unable to exit any of its stores within the next three years, its investment will be thinly spread, with store refurbishments needed to entice shoppers, as well as online developments such as better delivery options and impactful digital marketing. In order to turn around performance, it is crucial that it focuses on clearly identifying its target customer, with its ‘broad appeal’ ranges failing to stand out against rivals such as PrettyLittleThing and Zara. Without significant changes to its product offer, it is likely to continue losing market share in the coming years.”
