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Topshop owner Arcadia the latest casualty as Coronavirus hits retail

Topshop owner Arcadia the latest casualty as Coronavirus hits retail

Arcadia, the retail company that owns some of the UK highstreet's biggest brands, is reportedly on the brink of collapse, potentially putting thousands of jobs at risk.

The retail empire, which includes Topshop, Burton and Dorothy Perkins could go into administration within weeks, a process where an outside 'administrator' is appointed to ensure that the company can repay its creditors when it is on the brink of collapse.

Sir Phillip Green, the owner of Arcadia, had been in talks over borrowing £30 million, to see the company through the Christmas period. However, these talks failed and the looming administration of the company means that as many as 13,000 jobs across the UK could now be at risk.

The company have said that one of the major reasons for their predicament has been the pandemic, with a spokesperson stating that it 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 the Republic of Ireland as soon as the government Covid-19 restrictions are lifted next week."

The company have also struggled to adapt to modern consumer habits, falling behind the likes of Zara and fast-fashion companies, as they have continued to favour their brick and mortar stores. 

Although fast fashion has been heavily criticised in recent days - with the online brand Pretty Little Thing offering discounts of up to 99% and garnering social media criticism for their environmental impact, consumer habits are trending towards the internet. Although many buyers abhor the low prices and exploitation that fast fashion causes, most consumers are moving away from the high street - who are far from immune from their own exploitation scandals.

A lack of footfall due to the nation's lockdowns have damaged their business model more than other retailers, who have moved much of their operations online in recent years.

Former chief executive of the company, Lord Rose, said they had been "caught out" by the "relentless pace of change" in retail. Lord Rose, who served as chief executive until Sir Phillip Green's takeover in 2002 said that "people will come and pick over the carcass," of Arcadia group, meaning that popular brands such as Topshop could be bought by other retailers, whilst other high street brands pwned by the group might cease to exist.

Mike Ashley, the founder of Sports Direct and owner of House of Fraser and Newcastle United Football Club, has been suggested as one possible buyer for some of the brands. According to reports, Arcadia has not yet received a direct approach for any of their brands and a source close to the situation described an offer of a £50 million loan from Mike Ashley, to save Arcadia, as a "non-starter".

Arcadia has around 500 high street shops - with Topshop and Topman making up the bulk of these - and a full collapse of the group would see them become the largest business casualty of the pandemic. 

Whilst their collapse is not strictly the result of Covid-19, the gloomy economic outlook put forward by the chancellor last week shows that the pandemic has had a significant impact on the economy, one that has hit brick and mortar retailers and hospitality particularly hard, resulting in lasting damage.

Other large highstreet retailers have also suffered in recent months, with suitmaker Moss Bros undergoing a restructuring, conducted by auditing giant KPMG. The firm has launched Company Voluntary Arrangement (CVA) proposal, which provides a way for companies to pay off their debts, and offers the opportunity to address underlying issues within the company, rather than completely collapsing.

“With the likelihood of future trading continuing to be severely impacted by ongoing social distancing measures that prevent such events occurring, coupled with sustained working from home, the company is therefore pursuing a CVA in order to restructure its fixed cost base, giving it the best chance possible of emerging from lockdown in a manner which secures the long term future of the business.”

The UK's second lockdown, as well as the increased restrictions for the tiered system, means that many high street retailers who were relying on a strong Christmas to save their year may struggle to make up the losses, potentially leading to another round of collapses in the new year.

 

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