Asset stripping by its owner, years of brick-and-mortar meltdown, topped off by the Pandemic. Suppliers, landlords, and pensioners twist in the wind.
One of the UK’s largest brick-and-mortar fashion retailers, Arcadia, has crashed into administration, becoming the country’s biggest corporate casualty of the Pandemic so far, according to its administrator Deloitte. But it had already been weakened by years of brick-and-mortar meltdown and by asset stripping by its owners.
Arcadia employs 13,000 workers and runs 422 stores in the UK as well as 22 outlets overseas, a far cry from the more than 2,000 outlets it operated globally in 2004 when current owner, Philip Green, took over the company.
Arcadia’s brands include such retail stalwarts as Topshop, Topman, Dorothy Perkins and Burton. Since the group has opted for a “light-touch” administration, those brands will be able to continue operating their stores and ecommerce sites throughout the process, while the firm is shielded from creditors’ demands. A buyer is sought for all or parts of the company.
Because Arcadia is privately owned, it does not have to disclose publicly the state of its accounts and how much debt it owes its creditors, including its lenders. According to multiple reports, it owes over half a billion pounds to its pension fund members and suppliers, much of which will now go unpaid.
On announcing its collapse on Monday evening, Arcadia became the latest in a long line of once-ubiquitous retail chains — BHS, which was also owned by Green, Banana Republic, Barratts, JJB Sports, Comet, C&A, Dixons, Debenhams…– that have failed to adapt to the brutal conditions that prevail on the UK high street, including rampant rental inflation, soaring business rates, and the unstoppable rise of e-commerce.
In a press release, Arcadia pinned much of the blame for its bankruptcy on the lockdowns and other restrictions: “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.”
But the firm’s fortunes began souring long before the Pandemic. Some date the start of the decline to 2005, when Green paid a whopping £1.2 billion tax-free dividend to Arcadia’s Monaco-based holding group Taveta, whose sole director is Green’s wife, Tina Green. The dividend was the biggest paycheck in British corporate history and was more than three times the company’s annual operating profits that year.
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Nick Corbishley 