Philip Green’s Arcadia is preparing to enter administration, putting hundreds of shops and more than 13,000 jobs at risk in what would be the biggest retail collapse of the pandemic so far.
The group, whose brands include Topshop, Burton and Wallis, said it was “working on a number of contingency options” after Covid-19 hit its struggling business hard.
Arcadia made Sir Philip “the fastest £1bn in history” in the early 2000s, cementing his reputation as Britain’s premier retail dealmaker. But the group has been under sustained pressure in recent years and has been further damaged by the pandemic, which has wreaked havoc on the already struggling UK high street.
Arcadia closed stores and cut rents last year, but many of its shops are on high streets and in regional shopping centres where visitor numbers were slow to recover after the UK’s 12-week national lockdown.
“The forced closure of our stores for sustained periods as a result of the Covid-19 pandemic has had a material impact on trading across our businesses,” it said on Friday.
Arcadia plans to reopen stores in England and Ireland when Covid restrictions are lifted next week, but its arrears are piling up. It has not paid rent on many of its stores for months, according to real estate advisers.
“It looks like the end of the line for Sir Philip,” said Richard Hyman, an independent retail commentator who has known him for many years. “Trading at Arcadia has been very poor this year,” he added, pointing out that the 68-year-old tycoon now spends most of his time in Monaco and leaves the day-to-day running of Arcadia to chief executive Ian Grabiner.
Arcadia’s plight is a far cry from the early 2000s, when Sir Philip took the company private for £850m, most of it borrowed, as part of a dealmaking spree that included the acquisition of BHS and two attempts to take over Marks and Spencer.
Aggressive cost-cutting rapidly improved Arcadia’s profitability, allowing it to pay a £1.2bn tax-free dividend to the Green family. However, Sir Philip’s buccaneering reputation was tarnished by the sale of BHS for just £1 and its subsequent acrimonious collapse in 2016.
Arcadia declined to comment on a potential administration. Longtime advisers Deloitte could be appointed as administrators early next week, according to Sky News. Deloitte also declined to comment.
As recently as five years ago, Arcadia was the UK’s fourth-largest clothing retailer, according to GlobalData. Now it is tenth, with less than 3 per cent of the market. It has not paid a dividend for more than a decade.
Rival mid-market operators such as Primark, H&M and Zara have undercut Arcadia’s prices, while its relatively under-developed online offering has been outclassed by operators such as Asos and Boohoo.
Arcadia cut about 500 head-office jobs earlier this year, and administration is likely to mean more significant job losses even if buyers are subsequently found for parts of the group.
Restructuring experts have said there is still value in the Topshop/Topman brand, which accounts for almost half the group’s sales. “In the right hands, they could get a half-decent auction going for Topshop,” said one.
Potential bidders could include Next, which recently acquired the UK business of Victoria’s Secret out of administration, and Boohoo, which bought the Karen Millen and Oasis brands.
Mike Ashley, founder of Sports Direct, is also likely to be among the interested parties, although a personal rivalry between Mr Ashley and Sir Philip could complicate any deal.
Arcadia’s statement caps a tumultuous week for high-street fashion retailers.
JD Sports has emerged as the leading contender to buy struggling department store group Debenhams — in whose stores Arcadia brands are a major presence — in a transaction that could result in more store closures.
Established retailers such as Boots, John Lewis, M&S and Dixons Carphone have cut thousands of jobs as lockdowns have sharply reduced sales. Upmarket fashion label Jaeger on Friday said 13 of its stores would close, with the loss of 100 jobs.
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An insolvency would prompt more scrutiny of Arcadia’s pension arrangements. The group’s scheme has a deficit of up to £350m, according to pensions consultant John Ralfe, and Arcadia agreed a plan last year to inject additional cash and assets to reduce the deficit.
Former MP Frank Field, who as chair of the work and pensions select committee, excoriated Sir Philip over the state of the BHS pension scheme in 2016, called upon the tycoon and his wife Tina to do more.
“Lady Green was the recipient of the largest dividend payment in British history,” he said. “It is now time [to pay] some of that mega-dividend into the Arcadia pensions fund — where it should have gone in the first place.”
The Pensions Regulator said it was “working with the directors, the trustees and their respective advisers, as well as the PPF, to protect the position of the Arcadia pension schemes’ members to the fullest extent possible”.
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