Investment: Bad timing for New Look

NEW LOOK, the budget-priced women's fashion chain, has not had a happy experience since coming to the market at the second attempt in June. Though the issue was priced cheaply at 165p, the shares barely rose above the issue price on their first day and have been under water ever since.

However, this has been more to do with stock market volatility and a lack of appetite for new issues in the summer than anything to do with fundamentals. New Look's debut also coincided with smaller fashion retailers falling dramatically out of favour, a situation made worse by Marks & Spencer's recent woes.

This is unfortunate, as New Look has traded reasonably robustly in difficult conditions. Its maiden pre-tax profits were above some expectations, rising 21 per cent to pounds 24.1m before exceptionals. Like-for-like sales were up by a reasonable 2.7 per cent in the period though they have slipped to negative 1 per cent in current trading. On the plus side, the company has shifted all its summer stock without affecting margins, which are up by 1.2 percentage points.

There have been mistakes. The French and German stores made a loss of pounds 600,000 in the six months compared with a break-even forecast after the company failed to adapt its merchandise to local markets. Management hopes to be back in the black on the Continent within 18 months.

Tougher times for consumers could suit New Look's lower prices. And on full-year forecasts of pounds 43m the shares - up a penny to 145p - trade on a lowly forward p/e of 10. Hold.