retail

Philip Green’s Arcadia faces administration


Philip Green’s Arcadia is considering administration as one of a number of options to save its brands, putting hundreds of shops and more than 13,000 jobs at risk.

In a statement on Friday, the group, which includes Topshop, Burton and Wallis among others, said it was “working on a number of contingency options” after the coronavirus pandemic hit its already struggling business hard.

“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 added.

The group declined to comment on a potential administration. A Sky News report stated that longtime advisers Deloitte could be appointed as administrators early next week.

Arcadia said its stores “will be opening again in England and Ireland as soon as Covid-19 restrictions are lifted next week”. But administration raises the prospect of significant store closures and job losses, even if buyers are found for parts of the group.

Arcadia has long been considered a potential Covid-19 casualty. It used a company voluntary arrangement to close stores and cut rents last year, but its sales and profits have been hit hard by the pandemic; many of its stores are on high streets and in regional shopping centres, where visitor numbers have been slow to recover.

Even before the pandemic, the group was under sustained pressure from mid-market competitors such as Primark, H&M and Zara, while its relatively under-developed online offering was eclipsed by online-only operators such as Asos and Boohoo.

As recently as five years ago, Arcadia was the fourth-largest clothing retailer in the UK, according to GlobalData. Now it is tenth, with less than 3 per cent of the market.

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 to Topshop,” said one.

Potential bidders could include Next, which recently acquired the UK business of Victoria’s Secret out of administration, or 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 the personal rivalry between Mr Ashley and Sir Philip could complicate matters.

Arcadia’s statement caps a tumultuous week for high street fashion retailers, whose stores in England remain closed until December 2 because of a government lockdown.

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.

Upmarket fashion label Jaeger, part of the Edinburgh Woollen Mill group, said on Friday that 13 of its stores would close with the loss of 100 jobs.

Any administration at Arcadia would be complicated by the group’s pension deficit, which is put at up to £350m depending on the method of measurement.

The group reached agreement with the Pensions Regulator and the Pension Protection Fund last year on a plan to inject additional cash and security over certain assets into the fund.

But a fund in deficit automatically passes to the protection fund for an assessment period. That may prompt accusations that Sir Philip, whose family’s fortune is estimated at more than £900m, is again walking away from obligations to retirees.

The tycoon was forced to pay £343m into the BHS pension fund after selling the department store group to a former bankrupt with no retail experience in 2015. BHS collapsed barely a year later, leaving a large unfunded pension liability and prompting widespread condemnation.



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