The struggling fashion retailer said its package of measures included seeking agreement from creditors for a so-called Company Voluntary Arrangement (CVA) that would allow it to slash costs including high rent bills in a “challenging” retail environment.
New Look said it was forced to take action to improve the operational performance of the company and all stores would be open as normal ahead of a creditor vote on the proposals, expected on 21 March.
In addition to the closure of under-performing stores, including six further sub-let sites, the retailer said it was seeking rent reductions and revised lease terms at another 393 of its 593 stores.
New Look, which has 15,300 UK staff, said it would attempt to redeploy some of the 980 people at risk of redundancy under the process – adding that its online sales operation was unaffected by the restructuring.
Just last month it had revealed a nine month pre-tax loss of £123.5m – with like-for-like sales in the UK down almost 11% as shoppers’ budgets came under pressure from wage growth failing to keep pace with Brexit-linked inflation.
Executive chairman, Alistair McGeorge, said on Wednesday: “Given our challenged trading performance and over-rented UK store estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability.
“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal.
“A priority for us is to keep all potentially affected colleagues informed during this difficult time.”
Business services firm Deloitte is handling the restructuring plan.
Company partner, Daniel Butters, said: “The retail trading environment in the UK remains extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels.
“It is important to stress that no stores will close on day one, and employees, suppliers and business rates will continue to be paid on time and in full.”
Charlotte Pearce, retail analyst at analytics specialist GlobalData, feared New Look’s actions were not bold enough.
She said: “The retailer’s plan to close just 10% of its UK store estate is not enough and New Look must continue to rationalise its remaining oversized store network given it is a huge encumbrance for the retailer.
“A leaner store estate will improve space productivity, increase profit per store and provide a more consistent brand image, which is much needed for the retailer’s survival.”
CVAs are aimed at helping not only New Look reduce costs but also protect creditors from getting less – or nothing – if the retailer’s problems were to get worse.
New Look is the latest big high street name to seek help following the demise of Toys R Us and Maplin, which went into administration just a week ago.
The UK arm of the toy chain collapsed despite being granted a similar CVA in December while a number of restaurant brands, including Prezzo, have also been forced to cut back.
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BHS, Focus DIY and JJB Sports have also previously used CVAs to exit loss-making stores since the post-crisis recession, although all three companies ultimately succumbed to the pressure on their finances.
:: The stores slated for potential closure are: Aberdeen – Bon Accord; Beckton; Bolton Mens; Borehamwood; Brynmawr; Burton Mens; Cameron Toll; Cardiff – Queen Arcade; Cheshunt; Clevedon; Craigleith; Doncaster Mens; Dundee – Wellgate; Exeter Mens; Fleet; Gateshead – Team Valley; Glasgow – Buchanan Street Mens; Gorleston; Hanley Mens – Intu Potteries; Hounslow Mens; Hull – Whitefriargate; Keynsham; Kingswood; Leeds – The Core Shopping Centre; Leicester – Haymarket; London – Marble Arch; London – Moorgate/ London Wall; London – Oxford Circus; Maidenhead; Maidstone Mens; Merry Hill Mens; Metro Centre – Mens; Monmouth; Newport Mens; Newton Mearns; North Shields; Nottingham Mens; Ocean Terminal; Peterbrough Bridge Street; Pontypool; Portswood; Ramsgate; Reading – Broad Street; Reading Oracle Mens; Rhyl; Romford Mens; Rugby; Shrewsbury Mens; Sidmouth; Stockport – Merseyway; Stockton-on-Tees; Stratford Upon Avon -Bridge Street; Thornaby; Tonypandy; Torquay – Union Street; Tredegar; Troon; Wallsend; Weston Favell; Wigan Mens.