New Look Q1 was painful. Q2 likely no different

All,

We knew tis was going to be a challenging quarter, but there is simply very little gloss to put on New Look’s results through June.

Results:

- LfL revenue was down 7% in the UK + NI.

- Revenue was a corresponding 7% lower than our original plans (before the last call on which management already announced the market trend, which was echoed across the sector), much of it in the brick&mortar business, but even e-commerce declined.

- The shortfall in Revenue - predictably - hit Gross Margins in equal manner.

- A further reduction in UK store count and higher than anticipated savings - in particular in Staff Costs meant that the eventual EBITDA shortfall was “only” £5m (after applying £4m of provisions), resulting in Adj. EBITDA of £23m for the quarter.

- After a £12m outflow from WC and £7m from lease amortisations and above flagged outflows masked by provisions OCF was effectively neutral.

- CapEx was reduced to a mere £3m, which is below a sustainable £5m, but not by much.

- The restructuring then meant the company closed the quarter with cash of 109m.

Expectations:

We are very curious to hear of the company’s guidance for Q2. The SS collection will likely have had additional pain in store through end of June, July and August. At least it seems the Autumn season has started early enough. But even that may have cut short some weeks at the end of the summer that retailers must have hoped were available to clear out that summer stock.

We are expecting another round of inventory write-offs and continued consumer uncertainty.

The call is at noon today.

Wolfgang