New Look numbers - sales down

This is not a company that you own directly, rather indirectly, a business called New Look reported a 26 week update for the period to end 24 September 2016. New Look of course are owned by Brait, one of the worst performers in the Vestact stable this year. The stock has been battered by a number of factors, obviously the currency turning tail in favour of a stronger Rand (which means that the Rand price is lower of the same UK asset). The UK Brexit vote is one of the reasons. And the negative perception of UK assets has in some instances been reinforced by some tough trading conditions, the consumer is being very cautious in that part of the world. The unknown long term implications of something that isn't done yet (triggering of article 50) is weighing on UK assets. That saga now involves the courts, the next step is the appeal in December.

Politics, uncertainty about what it means for currencies and the business outlook is just some of the headwinds currently facing New Look and by extension Brait. Revenue for the first half of their financial year (New Look) fell 5 percent. UK like for like sales fell 8.8 percent. Adjusted EBITDA fell 28.6 percent. The group reported a modest loss before tax. The only highlights were that the online sales grew sharply and the stores footprint in China is growing. Fast fashion. It is a great market to be in, fashion that lasts a short time and costs just enough.

The chief of New Look (Anders Kristiansen) is a little more upbeat about the future than these current numbers suggest: "We remain confident in our long term strategy and continue to make good progress against our strategic initiatives." And then he continues: "Despite the challenges in the first half, we are excited and well-prepared for our peak trading period to come in Q3. We have increased our out-of-home marketing across key markets to improve 'top of mind' brand awareness, alongside an impactful Christmas window scheme."

The Brait share price has reflected the uncertainties, perhaps too much so. The Rand NAV should continue to fall whilst the Pound bottoms and equally, the company may well value these positions in the UK at a lower level. The Rand value reflects that uncertainty. Equally to remember is that Brait are pursuing a listing in the UK next year, round about the same time that Theresa May expects to trigger the start of leaving! We suggest that you hold and watch, John and his team are top class, the biggest shareholder is none other than Christo Wiese. I still remember when Brait tried to buy Shoprite, all those years ago, nearly a decade now - Shoprite accepts R13,2 bn buy-out offer from Brait. Nowadays Wiese seems to think that the mighty Steinhoff and Shoprite are a more natural fit.