Arcadia Group confirmed today that it is looking at “contingency options” amid media reports that it faces administration as early as next week.
The group, which owns multichannel brands including Topshop, Top Man, Dorothy Perkins, Miss Selfridges, Outfit, Wallis and Burton and is itself owned by Sir Philip Green, says it’s come under pressure as a result of Covid-19 lockdowns that have forced the closure of its non-essential retail shops.
It said in a statement: “We are aware of the recent media speculation surrounding the future of Arcadia. 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. As a result, the Arcadia boards have been working on a number of contingency options to secure the future of the group’s brands. The brands continue to trade and our stores will be opening again in England and ROI as soon as the Government Covid-19 restrictions are lifted next week.”
Before Covid-19, the retailer was already rethinking its brands’ routes to market, focusing on digital and and on wholesale partners and, last year, closing 50 of its 2,765 stores through a CVA (company voluntary agreement). The pandemic has added to the pressure that it was already feeling and responding to. Reports suggest that if the group goes into administration it’s unlikely to be bought back by Sir Philip.
Arcadia is one of many clothing retailers that have come under sharp pressure during Covid-19 lockdowns. ONS figures for October suggested that clothing was one of two categories – the other being fuel – where retail sales have not yet recovered to pre-pandemic levels. Etail association the IMRG has more recently seen an uptick in the category in the run up to Black Friday. Some clothing retailers are offering the biggest discounts in today’s Black Friday event – with Boohoo, for example, cutting prices by up to 90%, while Arcadia brands Top Shop and Topman are offering discounts of up to 25%, and Burton of up to 60%.
Commenting on today’s news, Richard Lim, chief executive of Retail Economics, said: “Efforts to turn around the business appear to have faltered with the impact of the pandemic too significant a challenge for the once much-loved retailer.
"Clothing has been the hardest hit sector with the disruption to the way we live, work and play undermining the need for new outfits for many consumers. However, their demise has been accelerated because of an online proposition that falls way behind that of their competitors. Years of underinvestment in the digital channel has severely restricted their ability to trade successfully through this hugely difficult period.
"If this business does eventually fail, it will leave gaps across many of our high streets where they have occupied shops for decades."
Sofie Willmott, content head of apparel at data and analytics company GlobalData, said: "With demand for clothing & footwear plummeting this year due to a lack of social occasions, clothing specialists have been hard hit but some of Arcadia’s more digitally savvy competitors have thrived, posting impressive results as spend has shifted online. Although Arcadia’s brands including Topshop, Burton and Dorothy Perkins have well established online propositions, the majority of their sales would still have been generated in stores and its digital channels will not have made up for the significant sales lost from store closures during lockdowns.
“Considering its high street brand acquisitions in the last few years and that it has openly stated that it is poised for a shopping spree as competitors struggle, the boohoo group is likely to be interested in snapping up Topshop/ Topman, to boost its portfolio. However, a deal with the boohoo group is unlikely to include stores, bringing more bad news for high street locations and property owners, who will struggle to find other retailers that can fill this space.”
Tim Symes, partner at litigation firm Stewarts, said: "Arcadia’s imminent collapse could be a mortal blow to many of its suppliers already made vulnerable by the effects of Covid on its other customers. Expect more insolvencies to follow.
"Is this a race to beat HMRC? If Arcadia’s companies go into administration on Monday, that will be the day before crown preference rules come in which would have given the Revenue a special claim on the assets ahead of banks and ordinary creditors such as suppliers and landlords, for any unpaid PAYE, National Insurance, and VAT.
"Arcadia’s landlords were already facing the prospect of very heavy losses from months of unpaid rent, and now face the prospect of empty units for months to come."
• The news came as administrators already in control of the Edinburgh Woollen Mill Group’s Jaeger business said they had closed 13 of its stores since putting the business into administration last week. That comes with the loss of 159 jobs, in areas from stores to distribution centres and head office. The business now employs 244 members of staff in 63 stores and concessions. It continues to trade online, along with its online brands Austin Reed and Jacques Vert.
Tony Wright, joint administrator of Jaeger Retail and partner at FRP Advisory, said: “We continue to hold discussions with interested parties regarding a possible sale. Regretfully, redundancies have been made across a number of head office and store roles. We’re working with staff to support them and help make any claims to the Redundancy Payments Service.”
Dorothy Perkins is a Top100 retailer in RXUK Top500 research, while Topshop and Burton are Top100 and Topman is Top150. Jaeger is ranked Top250.