Troubled retailer New Look has secured approval from 98pc of its creditors for a deal to stem losses by closing 60 stores through a company voluntary arrangement that puts 980 staff at risk.
The retailer initiated the CVA, a form of insolvency aimed at protecting a business from going bust entirely, earlier this month.
New Look identified 60 out of its 593 stores in the UK to be closed, along with a further six sites that are sub-let to third parties. The plan requires the company to make up to 980 staff redundant, out of its 15,300 UK employees, although it will attempt to redeploy people “where possible”.
The plan also includes revised lease terms and a rent reduction ranging between 15pc and 55pc across 393 stores. The CVA has a duration of three years. Once the final decision on which stores will close has been made, they will shut within six to 12 months’ time, "but no stores will close on day one", the company said.
Alistair McGeorge, executive chairman of New Look, said: “In order to help restore long-term profitability, it is clear we need to reduce our fixed cost base."
He added: "Launching a CVA has been a tough decision and our priority remains keeping all potentially affected colleagues informed during this difficult time."
He said that the CVA was "one of a number of necessary actions we are taking to get the company back on track", including more cost-saving initiatives, addressing product pricing, adjusting its buying model, and "improving our speed to market".
New Look, which is owned by South Africa's Brait, had asked its creditors to approve the proposal by today. Deloitte is acting as nominee to the CVA.
The company has struggled with "challenged trading performance and over-rented UK store estate", according to Mr McGeorge, who rejoined New Look in November to help with its turnaround effort, having previously stepped down from the post in 2013.
Speaking to The Daily Telegraph in February, Mr McGeorge said the chain had been forced to discount products heavily after becoming "completely overcommitted" on stock levels, which had taken "a dreadful toll" on the business.
"Not only had we wrongly moved to become younger and edgier in the product that we bought [but] we put up the prices on average [by] about 13pc," Mr McGeorge said.
As a result New Look’s total sales fell and the company made a pre-tax loss of £123.5m in the 39 weeks to Dec 23, compared to a profit of £29.2m in the same period the year before.
New Look – which had £1.14bn of debt at the end of March 2017 – had come under pressure from its bondholders to agree to a costly financial restructuring, as lenders sought to avoid further damaging losses.
The retailer joined a host of British high street names reporting bad news today, as Carpetright scrambled to raise emergency cash and Mothercare sought more breathing room as it negotiated with its creditors, while Moss Bros issued its second profit warning this year and slashed its dividend.