New Look Seeks China Riches With Plan for Hundreds of Stores

New Look Group Ltd., a closely held budget fashion retailer, plans to open “hundreds” of stores in China as it joins competitors such as Hennes & Mauritz AB (HMB) that are tapping into growth in the world’s most populous nation.

The U.K.-based company will open its first Chinese store in March 2014 and aims to have 20 outlets there within a year, Chief Executive Officer Anders Kristiansen said today on a conference call as he reported a gain in full-year earnings.

“We’ve had good meetings with landlords” in China, Kristiansen said. “It all feels right, but we will take it step by step.”

New Look, whose owners include private-equity firms Permira Advisers LLP and Apax Partners Worldwide LLP, is setting its sights on expansion after selling bonds last month to refinance net debt of 1.1 billion pounds ($1.7 billion). In targeting China, the Weymouth, England-based retailer is following global peers Inditex SA, (ITX) H&M and Gap Inc. H&M CEO Karl-Johan Persson said this year that he sees the Asian nation overtaking Germany as the company’s largest market.

“New Look is now well positioned to explore exciting development opportunities of new markets,” Kristiansen said in a statement, pinpointing China and Russia as target markets. The retailer expects the economic outlook to remain “challenging.”

Stores in China will be smaller than those in the U.K. at about 2,500 square feet (232.3 square meters), the CEO said at a press conference.

Russian Stores

New Look also sees “exciting” potential in Russia, Poland and South Korea, he said. The retailer already operates about 20 stores in Russia through its franchise partner there.

Earnings before interest, taxes, depreciation and amortization rose 29 percent to 189.2 million pounds in the 53 weeks ended March 30, New Look said today.

Gross profit as a percentage of sales widened by 2 percentage points, reflecting both tighter control of inventory and a lower level of discounting, the company said.

U.K. same-store sales rebounded in the second half, gaining 2 percent compared with the first half’s 3.1 percent decline. For the year, group same-store sales fell 0.7 percent.

Online revenue increased by 50 percent, New Look said.

To contact the reporter on this story: Paul Jarvis at pjarvis@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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