New Look gets old broom

At 62, Tom Singh retakes day-to-day control of retailer he founded in 1969 after private equity owners tire of string of profit warnings Tom Singh has resumed day-to-day management control of New Look, the retailer he founded 42 years ago, after its private equity owners lost patience with its poor performance and ousted chief executive Carl McPhail. John Gildersleeve, the group’s chairman, announced his resignation at the same time. Singh, who founded New Look with a single store in Weymouth and retains 23% of the shares, was most recently a non-executive director at the group. He 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. The group declined to give a reason for the sudden departure of McPhail, a retail industry veteran who worked at Selfridges, Arcadia and Burton Group before joining New Look’s board in 2001 and assuming the top job in April 2008. 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. He also blamed the disappointing interim results on “worsening market conditions” – echoing a statement he made in February last year, when he blamed the decision to pull the float on the “unfavourable market backdrop”. He blamed the market in February this year, saying trading conditions in the UK had “continued to be challenging” as he announced a disappointing 9.1% decline in like-for-like sales in the 15 weeks to 8 January. 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. New Look has also suffered as Primark, a key competitor, poached its head of menswear, Steve Lawton, last summer, while Barbara Horspool, the retailer’s group design director, resigned last month to take up a post at Oasis. 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. Tipnis said that New Look’s debts were too high and took issue with the large “pay-in-kind” (PIK) component, where interest rolls up and is repaid in a lump sum at the end of the term. The PIK note was taken on to pay a dividend to New Look’s backers and management and may have proved the last straw for potential investors. New Look had planned to raise £650m to cut its £1bn debt rather than to invest in the company. Would-be investors reasoned that the majority of the float proceeds had been earmarked to pay off an expensive PIK loan that benefited New Look’s existing shareholders. Nick Bubb, analyst at Arden Partners, said: “If they had gone public a year ago it would have been disastrous for shareholders. It’s not just the move, or the snow. The retailer needs to strengthen its market position and its identity in an increasingly competitive market, where Primark is bigger and better and stronger than ever. “New Look has lost its way over the years. It’s origin is in very small sea-side stores. It has increased its store sizes over the years but without having something distinctive to put there.” • Tom Singh’s decision takes him down a well-worn path as founders and chief executives seek to restore the flailing businesses they established, or transformed, by returning to the helm. The best known example is Steve Jobs, co-founder of Apple. He left in 1984 after losing a power struggle with the board, only to return in 1996 and take up the chief executive reins a year later. Closer to home, Steve Morgan, who bought ailing Wellington Civil Engineers and transformed it into the builder, Redrow, left in 2000 after 26 years, only to rejoin in 2009. New Look Retail industry Private equity Tom Bawden guardian.co.uk

Posted by on March 21, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.