New Look, the fashion retailer owned by Apax Partners and Permira, has turned the screws on its suppliers by making them wait 25 per cent longer for their cash.
The retailer, which will report full-year trading figures tomorrow, told suppliers that to help pay for its bumper store opening programme they would have to wait 75 days to be paid, up from 60 days previously.
Faced with rising costs and falling prices, high street retailers are putting increasing pressure on suppliers to ease their financial pain by either lengthening payment terms or asking for substantial discounts.
Alastair Miller, New Look's managing director of finance and services, told its suppliers the new terms were due to an "increased investment in new space". In the past 12 months, the group has expanded aggressively in the UK and France, including acquiring 34 former Littlewoods outlets.
The Forum for Private Business, which represents a number of New Look's suppliers, has called on the Government to regulate to prevent retailers from changing terms mid-contract. It has asked Alistair Darling, the Secretary of State for Trade and Industry, to make the issue his "top priority".
New Look said payment terms were lengthening across the retail sector: Debenhams and Halfords make their suppliers wait 120 days for their money. "This is firmly within industry norms," a spokesman said.
But the FPB said "norms" were closer to 50 days. "Waiting an extra 15 days for their money makes a big dent in your cashflow if you're a small supplier."
New Look, which was taken private for £700m two years ago, is thought to have delayed its return to the stock market for at least 18 months. Instead, it is raising £350m via a payment-in-kind loan to fund a windfall for its shareholders. It is anxious not to be tarred with the same brush as Debenhams, which drew criticism for rushing its return to life as a quoted company.
New Look is expected to say it has bucked the retail downturn when it reports its figures tomorrow.Reuse content