Founder takes reins at New Look as CEO exits
Tuesday 22 March 2011
The chief executive and chairman of New Look are both quitting, following a dire year during which the company pulled a £1.8bn flotation, faced a damning investigation by Channel 4, posted tumbling sales and suffered disruption by moving head office staff from Weymouth to London.
In a terse statement, New Look said that Carl McPhail had "resigned" from the board with "immediate effect" and that John Gildersleeve, its non-executive chairman since January 2010, intended to "retire" to focus on his "other business interests".
Tom Singh, who founded New Look in 1969 and still holds a 22.4 per cent stake, has returned to the retailer as interim chief executive.
Industry sources suggested that New Look's private equity owners, Apax and Permira, which own 27 per cent each of the fashion chain, are likely to have forced the resignation of Mr McPhail.
New Look, which has 1,044 stores globally, had wanted to float the business for £1.8bn in early 2010, but pulled the IPO (initial public offering) in February, blaming "volatile" stock market conditions.
Most recently, New Look said its UK like-for-like sales tumbled by 9.1 per cent for the 15 weeks to 8 January. This followed the chain posting a 4.5 per cent fall in UK underlying sales for the half-year to 25 September. Both figures are likely to have hit New Look's profits hard for the year to the end of this month. On Mr McPhail's departure, Nick Bubb, the analyst at Arden Partners, said: "The buck stops at the top. There is a huge profit shortfall [this year] and someone has to take the blame. It is as simple as that. It appears to be time for a change. It is a little bit unfair but life is unfair."
New Look, which has 606 UK shops, would probably have suffered at least two profit warnings by now if it had floated.
Matthew McEachran, an analyst at Singer Capital Markets, said: "They would probably have been pumped up for an IPO. A lot of people would have been disappointed and morale must have fallen quite a bit."
While New Look suffered weak trading last year, other value fashion chains are likely to have found the going tough due to pressure on consumer spending. One source said that New Look's sales were now probably "back in the pack" with the likes of Peacocks, Matalan and Primark, which on 28 February reported a slowdown in UK sales since the first week of January.
Mr McEachran said: "The reality is that through the course of this year we have heard that the value end of the market has traded poorly."
In November, Mr McPhail was forced defend its supplier policy following Channel 4's Dispatches programme, "Fashion's Dirty Secret", which showed the appalling conditions endured by some workers making clothes for the retailer, as well as some rival chains, at a factory used by a subcontractor of one of New Look's suppliers.
Mr McPhail said it was "disappointing" as earlier in 2010 it "banned" all suppliers from using the Imperial Typewriter Building, where the subcontractor Sammi Leisurewear is based. New Look instructed Ernst & Young to carry out an investigation into the findings of the programme, which is still ongoing. Mr McPhail also spoke of the "disruption" from New Look moving its buying and merchandising team from Weymouth to London in the first half of 2010.
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