Fashion chain New Look has warned of a “fragile” retail environment stretching into next year as it reported a 60% fall in quarterly profits amid a sharp downturn in sales.
It was the latest sign of the tough times facing the UK high street as a report from the British Retail Consortium (BRC) showed a slowdown in sales growth for July.
New Look said underlying operating profit fell to £12.1m for the 13 weeks to 24 June, down from £30.5m in the same period last year.
Like-for-like sales in the UK slumped by 7.5%.
The company pointed to tough conditions on the high street as well as acknowledging that its offering had missed the mark in recent months.
Profits were also squeezed by the collapse in the pound since the Brexit vote – pushing up the retailer’s buying costs while at the same time it cut prices for key clothing lines.
Chief executive Anders Kristiansen said: “As expected, the UK market has remained difficult, which has resulted in a disappointing quarter of trading.
“Looking ahead, we expect the consumer economy to remain fragile and challenging market conditions to persist into 2018.”
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Mr Kristiansen said the company’s product was “not where it should be”, compounding the hit suffered from weak consumer confidence after the Brexit vote, and the drop in the value of the pound.
“It has been tough out there for most companies and that’s what we have seen ever since Brexit, but on the other hand we don’t think we have delivered as good a product as we could have,” he said.
The company is overhauling its clothing ranges and has hired Paula Dumont Lopez, who has held senior roles at Zara owner Inditex and Esprit, to become its new chief creative officer from next month.
New Look, owned by South African investment group Brait, has 890 stores, including 593 in the UK.
Mr Kristiansen said the group remained committed to a long-term strategy of reducing its dependence on the UK high street as it looks online and overseas for growth.
It has just launched a new website and has been expanding its number of outlets in China.
But Mr Kristiansen also said New Look “believes very much” in its UK store estate, with 98% of it profitable, though it is kept under review each quarter.
Shoppers are being squeezed by accelerating price growth as pay growth stutters and the high street appears to be bearing the brunt.
Figures published by Barclaycard on Tuesday showed a 3.5% increase in consumer spending in July but that households are prioritising supermarket purchases and the “experience economy” such as cinema trips over clothing, which saw spending fall.
Separate figures from the BRC from the retail sector showed like-for-like sales rose 0.9% in July, down from 1.2% in June.