COVID-19 Could Tip Topshop’s Troubled Parent Into Bankruptcy
LONDON — The end of an era could come sooner than anticipated for Topshop’s troubled parent, Arcadia Group, which is preparing to fall into administration, the U.K. equivalent of Chapter 11, according to media reports here.
Sky News said Friday that Arcadia could collapse “within days” with the retail group, owner of the Topshop, Topman, Burton and Dorothy Perkins brands, poised to call in administrators from Deloitte as early as next week if it does not secure 30 million pounds in emergency funding. Some 13,000 jobs are at risk.
The company owned by Sir Philip Green was already in the thick of a restructuring program that had forced it to shutter stores and lay off staff. In June 2019, Arcadia had narrowly avoided bankruptcy after its creditors agreed to back a cost-cutting plan put forward by the retailer.
Arcadia’s disgruntled creditors had voted in favor of seven proposed CVAs, or company voluntary arrangements, allowing the group to slash costs in a bid to return to profitability.
COVID-19 changed the game, making an already bad situation worse: earlier this year, along with many other retailers, Arcadia slashed bosses’ pay checks by up to 50 percent, “significantly reduced” head office staff and furloughed a “substantial” number of employees who were unable to work due to shop closures.
On Friday, Arcadia described the reports of an imminent bankruptcy as “speculation,” but added “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 [Republic of Ireland] as soon as the government COVID-19 restrictions are lifted next week.”
England will come out of national lockdown on Dec. 2, although tight regulations will remain in vast areas of the country until the spring.
Adding to Arcadia’s perfect storm was the downsizing of the department store Debenhams, which fell into administration earlier this year and is now being run by a consortium of lenders. Arcadia’s brand concessions were fixtures in the Debenhams stores, many of which have now shut.
If Arcadia fails to secure the emergency loan, and goes ahead with the bankruptcy filing, it will only be the latest in a long line of British retailers with large numbers of physical stores to go bust before, and after, the coronavirus pandemic.
It will also mark the end of an extraordinary two decades that saw Arcadia’s flagship Topshop brand become one of the hottest names in fashion.
During those 20 years, Green brokered deals with the likes of Kate Moss, Beyoncé, Kendall and Kylie Jenner for clothing, lingerie and makeup; the store actively scouted and supported young talents including Jonathan Anderson, and was a headline sponsor of London Fashion Week, bankrolling its own, large-scale venue during shows.
As recently as two years ago, Topshop was hosting shows for designers including Preen by Thornton Bregazzi, Nicopanda, Shrimps, Molly Goddard and Charlotte Knowles.
In 2012, Topshop’s heyday, Green inked a deal with Leonard Green & Partners to expand Topshop and its brother company Topman into the U.S. Their plan was to generate $1 billion in revenue from the Topshop and Topman brands and to double the brands’ worldwide sales over the subsequent three to four years. At the time, the deal valued Topshop and Topman at $3.22 billion.
The two Greens never reached their target, although the Topshop brand did gain traction at Nordstrom, where it continues to sell. In 2019, Leonard Green confirmed it had sold its 25 percent stake in Topshop/Topman back to parent company Arcadia Group, and confirmed that its directors had resigned from the Topshop/Topman board.
In the years that Topshop was seeking to expand in the U.S., Green was hit by a maelstrom of scandal. There was the sale and subsequent collapse of Green’s former retail chain BHS, a Parliamentary grilling over his responsibility for the hole in its pension fund, a tsunami of crises on the U.K. high street and an Arcadia workplace harassment scandal that The Telegraph newspaper broke in 2018.
Green had consistently defended himself against the paper’s accusations, and the two parties eventually settled their dispute in early 2019.
Earlier this year a Pima County, Ariz., judge dismissed the state’s case against Green, who had been charged with four counts of misdemeanor assault. As reported, Green was alleged to have “knowingly touched another person with the intent to injure, insult or provoke.”
The charges stemmed from accusations made by a female Pilates instructor at Canyon Ranch in January 2016 and January 2018, and Green had robustly denied them.
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