New Look in crunch talks over ‘radical’ switch to turnover-based rents

The fashion chain wants to move to a sales-based model at the majority of its 500 stores in the UK and Ireland in the wake of the pandemic.

A number of high street operators are pushing for a move to such rental agreements at a time when sales in physical stores have plummeted during the lockdown.

Mike Ashley’s Frasers Group, food-to-go specialist Pret A Manger and Theo Paphitis’ retail group are all having similar discussions with landlords.

New Look, which did not pay its quarterly rent bill in March, has drafted in property agents from CBRE and CWM to help it negotiate a switch to turnover-based rents, as first reported by Sky News.

One property source told Retail Week that although discussions between New Look and its landlords had been “proactive and civil”, the retailer’s proposal was too “radical”. 

“These are the sorts of conversations that have got to start across the whole industry”, the insider said. “But at the same time, retailers have got to come up with more equitable proposals that work for both them and their landlords.”

If such talks are unsuccessful, there are fears New Look could seek a second financial restructuring, just two years after it launched its CVA.

A New Look spokeswoman said: “As we look towards beginning to safely reopen stores, we can confirm we are in discussions with landlords regarding rental arrangements which fairly reflect the retail operating environment.”

The coronavirus crisis is also taking its toll on property owners across the UK.

Earlier this week, Intu, which operates some of the UK’s largest shopping centres, warned that its rental income is set to plummet to £310m in its current financial year compared to £491.6m during the previous 12 months.

One landlord warned that the fall-out from coronavirus is “going to be so much worse than 2008”, when the global financial crisis hammered the retail and property sectors.

The likes of Debenhams, Laura Ashley, Cath Kidston and Oasis Warehouse have already tumbled into administration since Prime Minister Boris Johnson implemented a UK-wide lockdown on March 23.

Other retailers, including the likes of JD Sports, have refused to pay rents at a time when their stores are closed for business.

Non-essential retailers will be allowed to re-open their shops from June 15.