Philip Green: from a £1.2bn payout to fighting fires on all fronts

Sir Philip Green is now fighting fires on all fronts with the “#MeToo” scandal blowing up at a time when the billionaire is battling to shore up his crumbling high street empire.

Profits at Topshop’s owner, Arcadia, have fallen sharply in recent years as the fashion group, which also owns the struggling Evans and Wallis brands, is hit hard by the growth of online shopping.

New figures seen by the Guardian show Arcadia’s sales were down 9% in a flat market over the 12 weeks to 26 August, according to the analysis firm Kantar Worldpanel. The group’s market share has shrunk to 3.4% – which means it is just over half the size of Primark – compared with 3.7% a year ago and 4.1% in 2015.

One former Arcadia staffer suggested the picture at Topshop had not improved, with sales still thought to be “tanking” amid tough high street conditions: “The other brands never made any money. Topshop and Topman always kept the whole business afloat. If Topshop is not working, they have got a huge problem.”

Last year, Green drafted in the Burberry executive Paul Price to run Topshop but the ex-employee suggested he was under considerable pressure: “It doesn’t matter how good he is, it’s too late. Nothing has been invested in any of the brands to the extent they can stand against the onslaught of online and the fact that fashion is not a pastime for young people any more.”

Green empire

The problems mark a dramatic decline in fortunes since 2005 when the Greens famously paid themselves £1.2bn from Arcadia, which still holds the record as the biggest payout in British corporate history. There was no dividend last year, let alone one with so many zeros, after a slump that saw the group’s turnover decline by £113m to £1.9bn.

Sales at all of Arcadia’s main brands fell that year with the steepest declines seen at Wallis, the 30-something womenswear brand, where sales fell 11.5%, and plus-sized chain Evans, down 11.2% in the year to 26 August 2017.

The financial snapshot, taken from the accounts of subsidiary companies filed at Companies House by GlobalData, is not much better at smart menswear brand Burton and former teen favourite Miss Selfridge, which both saw sales declines of nearly 8%.

Even at Topshop and Topman the figures made grim reading with combined sales down nearly 6%, as new brands such as Boohoo and Missguided pick off millennial shoppers.

The sale and subsequent collapse of BHS means Arcadia now accounts for the bulk of Green retail interests although he also owns a stake in the publicly quoted cut price online retailer MySale.

The BHS scandal, as well as the deteriorating financial performance of Arcadia, has taken a toll on the fortune controlled by Green’s Monaco-based wife, Tina. The couple, who are also thought to have a property portfolio that includes the Topshop flagship store in London’s West End, saw their wealth marked down £787m to £2bn in this year’s Sunday Times Rich List.

One analyst who declined to be named said Arcadia was suffering in what was a tough market for all fashion brands: “The only growth in the last two or three years has been sportswear,” he said. “Young people are not turning out to be particularly big buyers of clothing. All they want is skinny jeans and sneakers.”

The analyst said that the whole market had been forced to cut prices as it faced heavy competition from Primark and Zara and there was a small pack of pricier brands, including Topshop where “prices are not particularly good value.” The analyst added: “Teenagers will pay £100 or more for the latest cool gear like a trainer but it has got to be a brand that means something. I’m not sure that Topshop means a lot to the average 18-year-old.”

With Green’s reputation shredded by the fall out from the 2016 collapse of BHS, it was reported this year that Green was in talks to sell Arcadia to the Chinese firm Shandong Ruyi – although the tycoon said the reports were totally false.

Selling the company is fraught with difficulties, not least the scale of Arcadia’s pension fund which had a deficit of £993m in March last year – a figure based on the likely cost of winding up the scheme and securing benefits with an insurer.

The ownership of Top Shop also adds complexity. After Green launched an audacious bid to crack America with Topshop in 2009, he sold a 25% stake in Topshop and Topman to American private equity firm Leonard Green & Partners for £350m in a deal that valued the high street chains at £2bn.

By 2017, Leonard Green’s was said to have written down the value of its shareholding on its books. Topshop is also looking for another retailer to take over its expensive store on Fifth Avenue in Manhattan, which opened in 2014, according to US press reports.

Retail insiders point to the ongoing high street crisis and the spectre of Brexit, which could hit the sector’s profitability next year. Potential buyers have also been put off by the BHS disaster, not least knowing any deal would be subject to close scrutiny by the media and politicians.

“Would you buy a business from Philip Green?” asks one senior retail executive. “Could they do enough due diligence to satisfy themselves?”


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