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New Look says it is suspending payments to suppliers for existing stock “indefinitely”, telling them in a letter that the stock can be collected by its owners.
The retailer is also cancelling orders for its Spring and Summer clothing lines and won’t pay costs towards them.
New Look told the BBC it did not take the decision lightly. “This is a matter of survival,” it told suppliers.
One small firm said New Look’s behaviour was “totally out of order”.
‘Challenges’
The supplier, which provides clothing for several High Street chains and did not want its name published, told the BBC it was not currently owed money by New Look and had no outstanding orders with the retailer.
However, it added that New Look’s approach would “devastate smaller companies down the supply chain at a time when they need help the most”.
New Look’s instructions to suppliers came in the form of a letter, signed by chief executive Nigel Oddy and dated 2 April, which has been seen by the BBC.
All New Look stores have been closed since 21 March. The firm said it was still trading online, but its distribution centre was full and it could receive no more goods.
“We are acutely aware that our suppliers are facing their own challenges at this time, and that both their businesses and employees are being affected,” Mr Oddy wrote in his letter.
“Government support schemes continue to be announced throughout the world, and we encourage you to pursue any options that are available to you.”
The supplier who contacted the BBC said small firms could not afford to trade in those circumstances and accused New Look of “passing all the risk on to the supply chain”.
The firm said it, and others like it, had its designs manufactured in China and could not afford to take on all the liability by itself.
It added: “The new reality in China is that factories now insist on deposits for all orders placed on behalf of grocers and large retailers, as they cannot afford orders to be cancelled with no compensation to cover raw materials and production.”
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The firm called on those big retailers to “play their part in helping the whole supply chain by paying these deposits up front at the point of order”.
“Since the middle of March, our revenue has collapsed from £160,000 per day to virtually nothing, as almost all of our retail customers in the UK have chosen or had to close for the foreseeable future,” the supplier said, adding that it had already furloughed 90% of its staff.
New Look was already facing difficulties before the coronavirus pandemic struck.
It closed dozens of stores in 2018 and 2019 because of “challenging” retail conditions on the High Street.
A New Look spokesperson said: “Whilst our online sales channels remain open, albeit on a significantly reduced basis, we have regrettably had to inform suppliers that we cannot place new orders until further notice and will be temporarily postponing outstanding supplier payments until the situation improves.”
“We have not taken this decision lightly and have only done so out of absolute necessity, given the exceptional circumstances we are in. We greatly value our relationships with suppliers and are actively identifying opportunities where they can hold product for use for autumn-winter this year or spring-summer next year.”