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New Look’s bondholders prepare to fight against potential financial loss

ANALISIS Bondholders of New Look have appointed Rothschild investment bank to protect their interests in case the financial struggles the company is going through provoke a corporate overhaul.

The market expects the troubled retailer to report continued losses and falling sales when it publishes a trading update this week, reported the ‘Sunday Times’.

Soon after the new year kicked off, potential buyers were reported to be circling New Look, hoping to capitalise on its current financial weakness and plummeted bond prices. The potential buyers reportedly consist of hedge funds and vulture funds, including Apollo.

New Look’s bondholders need to prepare for a likely financial overhaul

“There’s a good business here but with far too much debt and too many shops,” a senior retail source told ‘The Mail on Sunday’. “The value of the company’s debt has fallen significantly in recent weeks. People in the buyout market are looking at it.”

Plunging bonds would put those potential buyers a in a position to seize New Look’s assets should it collapse. The collapse in New Look’s bond prices followed earlier reports on the fashion brand was mulling a company voluntary agreement (CVA) in an effort to restructure its fragile finances.

It’s worth recalling that in late 2017 Brait, New Look’s owner, wrote down the fast fashion chain’s value to zero. The South African company paid 780 million pounds for the business.

The retailer is also thought to be looking into reducing its footprint, with the closure of 60 stores across the UK.

Aditya Birla Style and Retail Ltd (ABFRL), the company managing Forever21 in India, has started downsizing the American brand presence in the country following a decline in sales.

The Indian licensee of the American fast fashion brand is downsizing the brand’s stores and cutting costs as sales from the fast fashion business decline, a top company executive said over the weekend, reported local media.

The company noted a 14 percent sales year-on-year decline over the last calendar year’s quarter, ended in December.

Loss widened because Forever21 took a one-time inventory hit, Ashish Dikshit, managing director of ABFRL’s Madura Lifestyle business, said in an investor call on Friday. However, NSV comparisons were also affected by changes in GST rates.

Dikshit added that “Assumptions have changed for the Forever21 business. We recognize that the current business needed significant restructuring—store resizing, a new store model, renegotiations.”

As a result, ABFRL has reduced the sizes of its oldest stores and will now focus on opening new but smaller stores, he said. Most of these are stores opened by the brand before ABFRL acquired the licence for Forever21 from previous partners DLF Brands and Diana Retail.

“Size, cost, and competition impacted legacy stores in Forever21, they were much bigger than the business model deserves,” Dikshit said. “The cost was much higher than it deserved.”

Bon-Ton files for Chapter 11 bankruptcy protection

The Bon-Ton Stores announced on February 4, 2018 that the company has filed voluntary petitions for a court-supervised financial restructuring under Chapter 11 of the United States Bankruptcy Code. The company added that it is currently in discussions with potential investors and its debt-holders regarding the terms of a financial restructuring plan and court-supervised process will be utilised to explore potential strategic alternatives including a sale of the company or certain of its assets.

Commenting on the development, Bill Tracy, Bon-Ton’s President and Chief Executive Officer, said in a statement: "We are currently engaged in discussions with potential investors and our debt-holders on a financial restructuring plan, and the actions we are taking are intended to give us additional time and financial flexibility to evaluate options for our business. During this court-supervised process, we plan to continue operating in the normal course and executing on our key initiatives to drive improved performance."

The company further said that stores, e-commerce and mobile platforms under the Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and Younkers brands are operating as usual. As previously announced, Bon-Ton intends to close 47 stores in 2018, four of which closed in January. The company has received a commitment from its existing ABL lenders for up to 725 million dollars in debtor-in-possession (DIP) financing to support the company's operations during the financial restructuring process.

Picture:Facebook/Bon-Ton

Uniqlo Japan January same-store sales decline 2.4 percent

January 2018 same-store sales including online sales at Uniqlo Japan, part of the Fast Retailing Group, decreased by 2.4 percent while sales at the company’s own stores decreased by 4.2 percent. Total sales including online sales decreased by 2.3 percent.

The company said, despite the record cold weather and strong sales of warm clothing ranges, low inventory of winter items in general resulted in a year-on-year dip in same-store sales for the month of January. Uniqlo Japan closed two stores during the month under review.

Picture:Uniqlo Japan website

JD.com to sell 2bn pounds of UK brands to Chinese customers

British fashion brands are set to benefit after Prime Minister Theresa May's official state visit to China this week. The British government's Department of International Trade has signed an agreement with Chinese online giant JD.com to sell British brands and products to its customers, in a deal valued at 2 billion pounds.

May met with JD chairman and chief executive Richard Liu at the residence of the British Ambassador to China where they discussed how UK brands can reach JD.com's 266 million customers.

Richard Burn, director-general of DIT China, said: “Many British brands recognise the huge potential of China’s enormous ecommerce market. JD truly understands what Chinese consumers want and has the resources to help British brands ensure success in the region. We’re looking forward to working with JD to bring more British brands to China in the future.”

Sales of British brands have grown 100 percent on its platform

The number of British brands retailing on the JD.com platform has doubled in the past two years. Sales have followed suit and in 2017 grew 100 percent year-on-year. Style brands such as Burberry, Stella McCartney and Alexander McQueen are already popular with Chinese consumers.

According to the Retail Bulletin, JD will launch special campaigns for seasonal products and undertake other activities to give brands more opportunities to reach Chinese consumers. The company will kick off with a 24-hour “Celebrate Britain” sales promotion for UK products this April to introduce the “Best of Britain” to Chinese customers.

“We’re pleased to be working with DIT to make it easier and more convenient for British brands to enter the Chinese market,” said Winston Cheng, president of international at JD.com. He added: “We’ve seen rapid growth in demand for British products from our consumers in recent years, and will look to showcase the ‘Best of Britain’ on our platform even more through this agreement.”

Last June, JD.com partnered with the UK online fashion platform Farfetch to bring more niche brands from around the world to Chinese consumers. In addition, the company sponsored shows at London Style Week last autumn and also partnered with the British Style Council /Vogue Designer Style Fund to help the BFC deepen its engagement with the Chinese market.

Credits: Photo JD.com; source: The Retail Bulletin

Deckers Q3 net sales increase 6.6 percent

Deckers Brands for the third fiscal quarter ended December 31, 2017 reported net sales increase of 6.6 percent to 810.5 million dollars compared to 760.3 million dollars for the same period last year. On a constant currency basis, net sales increased 6.3 percent. Diluted earnings per share for the quarter were 2.69 dollars compared to 1.27 dollars for the same period last year and non-GAAP diluted earnings per share were 4.97 dollars compared to 4.11 dollars last year.

“Our third quarter results, which meaningfully exceeded expectations, underscore the progress we have made developing a stronger foundation to support profitable growth,” said Dave Powers, the company’s President and Chief Executive Officer in a media statement, adding, “Our refined product strategies, enhanced consumer messaging and wholesale account optimization efforts resulted in much stronger full price selling for our brand portfolio during the key holiday season.”

Deckers’ third quarter financial review

Gross margin was 52.2 percent compared to 50.5 percent for the same period last year. Operating income was 193.2 million dollars compared to 53.3 million dollars for the same period last year. Non-GAAP operating income was 203.1 million dollars compared to 182.2 million dollars last year.

UGG brand net sales increased 4.3 percent to 734.7 million dollars compared to 704 million dollars for the same period last year. Hoka One One brand net sales increased 65.7 percent to 31.8 million dollars compared to 19.2 million dollars for the same period last year, while Teva brand net sales increased 33.4 percent to 19.5 million dollars compared to 14.6 million dollars for the same period last year. Sanuk brand net sales for the third quarter were flat to last year at 13.9 million dollars.

Wholesale net sales increased 10.3 percent to 428.8 million dollars compared to 388.6 million dollars last year and DTC net sales for the quarter increased 2.7 percent to 381.7 million dollars compared to 371.7 million dollars for the same period last year. DTC comparable sales for the third quarter increased 1.7 percent.

Domestic net sales increased 2.5 percent to 501.7 million dollars compared to 489.5 million dollars for the same period last year. International net sales for the period increased 14 percent to 308.8 million dollars compared to 270.8 million dollars for the same period last year.

Deckers announces FY18 and Q4 guidance

Deckers now expects fiscal year 2018 net sales to be in the range of 1,873 million dollars to 1,878 million dollars and gross margin is expected to be approximately 49 percent. Non-GAAP diluted earnings per share are expected to be in the range of 5.37 dollars to 5.42 dollars excluding any charges that may occur from additional store closures, restructuring and other charges.

For the fourth quarter, net sales are expected to be in the range of 370 million dollars to 375 million dollars and non-GAAP diluted earnings per share in the range of 0.15 dollar to 0.20 dollar.

Picture:Hoka One One website

Dune annual like-for-like sales grow 5.2 percent

The Dune Group has reported an increase in like for like retail sales of 6.5 percent for the autumn/winter season and 5.2 percent for the 52 weeks ended January 27, 2018. Retail sales for the six weeks to December 30, the company added were up 7.2 percent on a like for like basis driven by growth across all retail channels; stores, concessions and in particular online.

Commenting on the positive results, Daniel Rubin, the company’s Executive Chairman, said in a statement: “Our strong results over Christmas and throughout 2017 are testament to the hard work of our teams and our strategic investments in product, our omni-channel proposition and brand marketing. We have successfully maintained our gross margin despite the impact of sterling’s relative weakness during much of the year.”

Sales during January, the company further said, have continued to be strong rounding out what has been a good year in the UK, despite a challenging retail environment. International growth was positive during the period under review with sales at retail in overseas markets now representing 26 percent of the tital group sales.

Dune, after opening its first store on London’s Kings Road in 1993 has expanded its presence to over 250 outlets across the world.

Picture:Dune website

Ralph Lauren posts adjusted Q3 earnings of 2.03 dollars

Ralph Lauren Corporation reported loss per diluted share of 1 dollar on a reported basis and 2.03 dollars on an adjusted basis, excluding restructuring and related charges as well as the impact of tax reform, for the third quarter of fiscal 2018. This compared to earnings per diluted share of 0.98 dollar on a reported basis and 1.86 dollars on an adjusted basis, excluding restructuring-related and other charges, for the third quarter of fiscal 2017. The company said, revenue decreased by 4 percent to 1.6 billion dollars on a reported basis and 6 percent in constant currency, driven by initiatives to increase quality of sales, reduce promotional activity, and elevate our distribution, as well as brand exits and lower consumer demand.

“As we prepare to celebrate our 50th anniversary and look ahead to the future, we continue to focus on evolving the expression of our iconic brand and its rich heritage to connect with today’s consumers in all the ways they experience our brand,” said Ralph Lauren, Executive Chairman and Chief Creative Officer in a media release.

Highlights of Ralph Lauren’s Q3 performance

The third quarter revenue decline, the company said, was at the top end of the company’s guidance of a 6 percent-8 percent constant currency revenue decline. Foreign currency benefited revenue growth by approximately 190 basis points in the third quarter, above the guidance of 160-170 basis points of benefit, as foreign exchange rates moved favourably during the quarter.

North America revenue in the third quarter decreased 11percent to 886 million dollars due to lower sales in both the retail and wholesale channels, driven by distribution and brand exits, a strategic reduction in shipments and promotional activity to increase quality of sales, as well as lower consumer demand. On a constant currency basis, comparable store sales in North America were down 10 percent, including a 3 percent decline in brick and mortar stores and a 27 percent decrease in ecommerce, primarily due to a planned reduction in promotional activity and lower traffic.

Europe revenue in the third quarter increased 8 percent to 378 million dollars on a reported basis and was flat in constant currency. On a constant currency basis, comparable store sales in Europe were down 8 percent, driven by a 9 percent decline in brick and mortar stores and a 1 percent decline in ecommerce, as the company continued to intensify its focus on driving quality of sales with a pullback in promotions.

Asia revenue increased 7 percent on both reported and constant currency basis to 251 million dollars, driven by strength in both retail and wholesale channels. Comparable store sales increased 3 percent in constant currency driven by improved conversion, average unit retail and the number of transactions.

Gross profit was 996 million dollars and gross margin was 60.7 percent on both a reported and adjusted basis, 250 basis points above the prior year, excluding restructuring and related charges. Operating income was 189 million dollars on a reported basis, including restructuring-related and other charges of 27 million dollars. On an adjusted basis, operating income of 216 million dollars declined 1 percent to the prior year period and operating margin was 13.2 percent, 40 basis points above the prior year period, excluding restructuring-related and other charges from both periods. The adjusted operating margin was above the company’s guidance of down 50-70 basis points in constant currency.

On a reported basis, net loss in the third quarter was 82 million dollars or 1 dollar per diluted share. On an adjusted basis, net income was 167 million dollars, or 2.03 dollars per diluted share, excluding any impact from tax reform as well as restructuring and related charges compared to a net income of 82 million dollars or 0.98 dollar per diluted share on a reported basis, and net income of 155 million dollars or 1.86 dollars per diluted share on an adjusted basis, for the third quarter of fiscal 2017.

Ralph Lauren reveals full year and fourth quarter outlook

For fiscal 2018, the company continues to expect net revenue to decrease 8 percent to 9 percent, excluding the impact of foreign currency. Foreign currency is now expected to have approximately 100 basis points of benefit to revenue growth versus previous guidance of approximately 80 basis points of positive impact, given recent movements in foreign exchange rates.

Based on the year-to-date performance, the company now expects operating margin for the year to be 10 percent-10.5 percent, excluding the impact of foreign currency, and versus previous guidance of 9.5 percent-10.5 percent. Foreign currency is now expected to have 30 basis points of benefit to operating margin versus previous guidance for minimal impact, due to recent movements in foreign exchange rates.

In the fourth quarter, the company expects net revenue to be down 8 percent-10 percent, excluding the impact of foreign currency. Foreign currency is expected to have approximately 330 basis points of benefit to revenue growth in the fourth quarter of fiscal 2018. Operating margin for the quarter is expected to be down 240-260 basis points, excluding the impact of foreign currency. Foreign currency is estimated to benefit operating margin by approximately 90 basis points in the fourth quarter.

Picture:Facebook/Ralph Lauren

Chinese e-commerce giant Alibaba Thursday posted a 35 percent surge in net profit in the third quarter, fuelled by a record-breaking sales bonanza during its annual Singles Day shopping festival.

The company said profit jumped to 24.1 billion yuan (3.7 billion US-dollar) between October and December, compared to 17.9 billion yuan in the same quarter in 2016. Alibaba runs an annual promotion on November 11 that draws the country's growing consumer class which can buy an array of products at the click of a button on their smartphones. Last year's event recorded 168.2 billion yuan (25.9 billion dollar) in payments, a 39 percent increase from the 2016 festival. Rivals such as JD.com had also reported brisk business on November 11.

"Alibaba had another great quarter driven by the continued strength of the Chinese consumer and the wide and innovative range of services we provide for merchants and consumers," Alibaba chief executive Daniel Zhang said in an earnings report. "We are excited by the continued momentum in new retail, which came to life during another record-breaking 11.11 Global Shopping Festival," Zhang said. Alibaba, which has made billionaire founder Jack Ma one of China's richest men and a global e-commerce icon, has been on a roll, regularly beating revenue estimates. The New York-listed company said revenue jumped 56 percent to 83 billion yuan (12.76 billion dollar) in the third quarter. (AFP)

Ferragamo FY17 revenues drop 3.1 percent

The Salvatore Ferragamo Group, in its preliminary results statement for fiscal year 2017 said that total consolidated revenue amounted to 1,393 million euros (1,728.9 million dollars), down 3.1 percent at current exchange and 1.4 percent at constant exchange rates against FY16. Revenues in the fourth quarter, the company said, registered a decrease of 8.4 percent or 5.1 percent at constant exchange, penalized by the currencies trend and by the lower incidence of promotional sales in the primary channel against last year.

As of December 31, 2017, the group's retail network consisted of 685 points of sales, including 410 directly operated stores (DOS) and 275 third party operated stores (TPOS) in the wholesale and travel retail channel, as well as the presence in department stores and multi-brand specialty stores. In FY17 the retail distribution channel posted 0.8 percent decline in consolidated revenues but revenues rose 1.3 percent at constant exchange rates, with a decrease of 1.7 percent at constant exchange rates and like-for-like sales. The wholesale channel, the company added, penalized by the destocking activity, the political tensions in South Korea and the strategic rationalization in Japan, registered a decrease in revenues of 7.4 percent at current exchange and 6.2 percent at constant exchange rates.

Geographical review of Ferragamo’s results

The company said, Asia Pacific area is confirmed as the group's top market in terms of revenues, decreasing by 2.1 percent or 0.4 percent at constant exchange rates, penalized by the soft trend in South Korea, mostly due to the significant decrease of Chinese tourists, and the on-going negative performance in Hong Kong. However the retail channel in China reported a 2.5 percent or 7 percent revenue growth in FY17.

Revenues in Europe decreased 3.6 percent or 3 percent at constant exchange rates, with a positive performance for the retail channel and a negative trend for the wholesale business, negatively impacted by the destocking activity. North America recorded a revenue decrease of 4.2 percent or 2.2 percent at constant exchange rates, also negatively impacted by the department stores sales. The Japanese market registered a 5.6 percent or 3.1 percent decrease at constant exchange rates, due to rationalization of the wholesale channel, while the retail stores recorded a positive performance at constant exchange rates. Revenues in the Central and South America grew by 2 percent or 6.5 percent at constant exchange rates.

Among the product categories, at constant exchange rates, footwear posted a decrease of 1.7 percent and handbags and leather accessories of 0.8 percent, while fragrances registered a 2.2 percent increase.

Picture:Facebook/Salvatore Ferragamo