The investment column: New Look

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The Independent Online
NEW LOOK, the value-for-money womenswear retailer, yesterday proved that it is possible to make money in the high street, after posting a 14 per cent rise in pre-tax profits to pounds 44.2m.

Although like-for-like sales grew 11 per cent, the shares fell 10p to 204.5p on a downbeat current trading statement showing that year-on-year sales figures for this May were sharply down on last year when trading was boosted by a heatwave. Fortunately, New Look has strengths to offset such risks. Chief executive Jim Hodkinson says he reacts to changing consumer demand by refreshing 10 per cent of stock every week. This is combined with aggressive pursuit of market share through "grenade pricing", selling tops at pounds 3.99 and dresses for pounds 9.99.

New Look, which came to the market at 165p per share last summer, has proved a volatile investment so far. But the shares are now well ahead of the issue price after a good recent run, and its flexible pricing strategy should help it outperform the sector. One analyst said: "By being able to buy in and sell products very quickly it doesn't have orders backed up for six months - the problem M&S and Next suffer from."

Analysts upgraded forecasts with most expecting pre-tax profits of pounds 47m for this year on earnings per share of 16p. That puts the shares on a p/e of 13, an inappropriate discount for a discount retailer bucking the trend of gloomy news in the high street. Buy.