Fitch cuts New Look, notes

Fitch Ratings said it downgraded New Look Retail Group Ltd.'s long-term issuer default rating to CC from CCC.

The agency also downgraded New Look Secured Issuer plc's 2022 senior secured notes to C/RR5/23% from CCC/RR4/44% and New Look Senior Issuer plc's 2023 senior notes to C/RR6/0% from CC/RR6/0%.

Fitch said the downgrade of the issuer default rating reflects uncertainty over the sustainability of New Look's capital structure given a sharp deterioration in performance, evidenced by operating losses and accelerating cash outflows for the first nine months in the 12-month financial year ending March 2018.

Clearance sales under challenging trading conditions have seen New Look's profit margins to plummet, while generating limited cash flow benefits, the agency added.

“In response to this underperformance, New Look is now required to implement a challenging turnaround strategy and to reposition its business offering in the context of weakening UK consumer spending. However, this turnaround is based on the company shifting back to its strengths in its core mass market customer base, who are less fashion-led and who shop both online and in-store,” Fitch said in a news release.

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