Sir Philip Green’s Arcadio retail group is on the brink of collapse with around 15,000 jobs at risk. The Arcadia Group, which runs the Topshop, Dorothy Perkins and Burton brands, is expected to appoint Deloitte as administrators within days.
The group has more than 500 retail stores across the UK with the majority of these currently shut as a result of England’s second national lockdown, which will end next week.
Earlier this year, Arcadia revealed plans to cut around 500 of its 2,500 head office jobs amid a restructure in the face of the coronavirus crisis.
An Arcadia spokesman said: “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.”
It has been reported that the group had been in emergency talks with lenders in a bid to secure a £30 million loan to help shore up its finances.
Cameron Gunn, Founder and Senior Partner of ReSolve, said, “It is no secret that retail has been one of the hardest hit sectors in the UK economy due to COVID-19 leading to closure of non-essential shops and its material impacts on retailers’ ability to trade at a level that keeps them financially healthy. This is only exacerbated by the economic uncertainty that has led to less spending.
Arcadia has had well-publicised financial struggles and utilised seven CVAs in late 2019 to help it manage its debt burden. It was at this time it announced it would be focusing on digital, which was definitely the right thing to do. Digital is incredibly important for retailers. What we have seen in the past several months is that the ones that have a strong online presence and know how to engage online with their customers are doing much better than those that underestimated the power digital and neglected to invest in it. In many ways digital is the only way to go, as evidenced by the TM Lewin brand deciding to solely having an online presence.
However, in the case of Arcadia it may have been too little, too late with the likes of boohoo, Asos and other online-only brands already eating up its market share.”
Ian Bath, Corporate Sales Director, Nucleus Commercial Finance comments on the re-introduction of Crown Preference said “Although the re-introduction of Crown Preference has been expected for some time, and its implementation has already been delayed once, its impact will be felt significantly by UK SMEs. The new rules will mean less cash for businesses at a time when they desperately need it, to get back on their feet following a second national lockdown. “
“Businesses that have delayed payments to HMRC and sought Time to Pay arrangements to preserve cash, are likely to find these amounts being deducted from their inventory and other floating charge borrowings.”
“However, it is not just businesses who will feel the squeeze. A number of asset based lenders have already been looking to exit, or scale back, existing inventory facilities, reducing the options for businesses seeking funding. With CBILS soon coming to an end, many businesses will be looking for secured longer-term lending. Asset based lending will play a vital role, enabling businesses to unlock additional value from the assets they already own, providing them with certainty in times of great uncertainty.”
Dr Gordon Fletcher, of the University of Salford Business School, said: “As Cyber Monday began, the news of the imminent failure of the Arcadia group started gaining pace. The twist in this story is that the rumours started on Black Friday. It is the day when many retailers would move into the ‘black’ – in other words into profit.”
“Arcadia’s failure is a significant blow to the high street with so many recognisable brands within the group. This is a significant rewriting of what we will experience in face-to-face retail in the near future.”
“Some parts of the fallen empire will be retrieved but there are some immediate challenges. The fate of 13,000 employees, a £350 million pension shortfall and an estimated £250 million owed to suppliers all hangs in the balance.
“With such large numbers the fate of Arcadia will also have an impact on many other businesses across the UK. While the failure will be blamed on the trading position brought about by COVID-19 and the lockdown, the media reporting of Arcadia hints to the much deeper issues.”
“Arcadia is personalised around its chairman, Philip Green. This is a textbook case study into the impact that different styles of leadership and management can have on a business. Arcadia’s brands have been slow to diversify into other countries or to make an exciting online offering – although Topshop’s 80% discounting on Cyber Monday is a headline in its own right – and have not kept pace with the contemporary fashion offerings of the online-only competitors.”
“As a private company the focus appears to have been on the short term by reaping of dividends during profitable periods with no investment back into the brands themselves. Consumers do increasingly expect conversations and interaction with the brands that they want. If that investment has not been made to let that conversation happen then loyal consumers will look elsewhere. Arcadia and its brands are now paying the price for this lack of focus on the consumer and its ability to keep pace with the changing expectations of retail.”
Nick Hill, customer Advisory Manager at the Money and Pensions Service, said “This is clearly a challenging time for all sectors, including retailers and there will now be thousands of Arcadia staff who will understandably be very concerned about their jobs, pensions and overall financial security as a result of this news. We would recommend that Arcadia staff check what they’re entitled to from their employer, including redundancy and holiday pay, and to consider that they may need to review their wider financial situation.”