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New Look seeks to close 10% of its UK stores under restructuring

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New Look seeks to close 10% of its UK stores under restructuring

New Look announced March 7 that it would seek creditor approval for a restructuring that would result in closing 10% of the fashion retailer's U.K. stores and cutting up to almost 1,000 jobs.

The transformation is designed to reduce the company's rental costs by striking new deals with landlords. The plan was devised under the terms of a so-called company voluntary arrangement, or CVA, which is similar to a Chapter 11 filing in the U.S. and allows businesses to restructure while avoiding administration or liquidation.

New Look is owned by the Malta-based investment holding company Brait SE, whose leading shareholder is Christoffel Wiese, former chairman and leading investor in the embattled South African retailer Steinhoff International Holdings NV. Wiese, known as Christo and widely regarded as one of South Africa's most successful and influential businessmen, owned 36.84% of the outstanding shares in Brait as of June 13, 2017, according to S&P Capital IQ.

New Look is the latest U.K. high street name to be confronted with a challenged trading performance and a difficult trading environment. Electronic goods retailer Maplin Electronics Ltd., which operated 217 stores in the U.K. and Ireland and employs 2,335 staff, on Feb. 28 slipped into administration. The U.K. arm of Toys R Us suffered the same fate on the same day after a lengthy search for a buyer proved unsuccessful. Toys R Us U.K. operated 105 stores and employed about 3,000 staff.

"Given our challenged trading performance and over-rented UK store estate, we are having to take tough but necessary actions to reduce our fixed-cost base and restore long-term profitability," New Look Executive Chairman Alistair McGeorge was quoted as saying in a statement.

Under the terms of its agreement, New Look said it intended to shutter 60 of its 593 U.K. stores along with six outlets that are sublet to third parties. The proposal also includes a reduction in rental costs and revised lease terms across 393 stores.

Redundancies from stores earmarked for closure totaled up to 980 workers out of the company's U.K. workforce of 15,300. Efforts would be made to redeploy staff where possible, New Look added.

New Look, which operates 906 stores worldwide, will seek approval from its creditors for the CVA on March 21.

"Ultimately, it will be for individual landlords to decide how they will vote on the CVA, but the proposal has sought to find a solution that works for all parties," Stephanie Pollitt, the British Property Federation's assistant director for real estate, was quoted as saying.

The retailer noted that all of its shops would remain open during the proposal period and that its online platform would be unaffected by the changes.

Charlotte Pearce, retail analyst at GlobalData, said New Look's plan to close 10% of its stores in the U.K. may not go far enough. "New Look must continue to rationalize its remaining oversized store network, given it is a huge encumbrance for the retailer," she was quoted as saying in a statement. "A leaner store estate will improve space productivity, increase profit per store and provide a more consistent brand image, which is much needed for the retailer's survival."