New Look is to pull the plug on its Chinese business as it focuses efforts on turning around its core UK division.
The fashion chain has drafted in property advisors from CBRE to find new tenants for its stores in the Asian nation.
New Look said it has already been “gradually reducing” its Chinese store estate and will shutter the remaining 120 by the end of December as it quits the world’s most populous nation. Its Shanghai head office will close shortly afterwards.
The retailer said performance in China had been “below expectations” despite ploughing “substantial investment” into the venture.
New Look executive chairman Alistair McGeorge said: “Having reviewed the trading performance of our business in China and the substantial investment required to continue operations in the market, we have made the difficult decision to exit our stores in China.
“Our priority will be to support all affected staff during this time. As our turnaround plans continue, we remain focused on ensuring that New Look is well positioned to drive strong business performance and profitable growth.”
The move, which comes seven months after New Look launched a CVA to streamline its UK portfolio, could now pave the way for it to exit its three other international markets – France, Poland and Belgium.
New Look’s struggling international division suffered losses of more than £37m in the year to March, exacerbating the problems it faces in its domestic market.
Across the group, underlying operating losses swelled to £74.3m and sales slid 7.3% to £1.35bn during the 12-month period.
In the first quarter of its current financial year, New Look’s underlying profit jumped 19% to £14.4m as cost savings boosted its bottom line.
However, like-for-like sales sank 4% during the same period, as total revenues slipped 2.7% to £329.4m.
McGeorge, who returned to the helm a year ago, is battling to revive New Look’s fortunes and had previously hinted at a retrenchment from its overseas operations.
In June, McGeorge told the Press Association that the retailer was reviewing its ambitious plans to open 500 stores in China.
He said at the time: “We are taking a view on all our stores. We are taking a good hard look, and we will probably do some downsizing.”
And in August he added that New Look would ramp up its focus on its “core strengths and heartland customer”.
Details of New Look’s exit from China emerged just months after Topshop said it was calling time on its franchise agreement with Shangpin after four years.
However, the Sir Philip Green-owned chain insisted it was “exploring opportunities” to grow the Topshop and Topman brands in China.