ADVERTISEMENT

Topshop’s Philip Green Met His Match With #MeToo

Topshop’s Philip Green Met His Match With #MeToo

(Bloomberg Businessweek) -- Since June, Sir Philip Green, Britain’s so-called king of retail, has been mostly ensconced on his $100 million yacht, Lionheart, off the coast of Monaco. Apart from a game of pingpong on the deck of his yacht with an unlikely companion—Portuguese soccer star Cristiano Ronaldo—Green has barely been in the public eye after he staved off the collapse of Arcadia Group Ltd., owner of Topshop, one of the U.K.’s best-known clothing chains. But he’s still in the eye of a storm of criticism over sexual harassment allegations and a management style that allowed his retail empire to spiral to the brink of bankruptcy.

On June 12, Green pushed through a rescue plan for Arcadia by negotiating rent reductions from his landlords while agreeing to shed 1,000 jobs and shut almost 50 of his 566 stores. And a decade after entering the American market with a glitzy New York opening, he called it quits in the U.S., where his Arcadia subsidiary filed for bankruptcy. He closed all 11 Topshop stores in the country.

Green appears to have bought some time to turn the business around after agreeing to inject almost £400 million ($500 million) into the business, mostly to plug a hole in the company’s pension fund. But many people say there’s more pain to come as the brick-and-mortar retail carnage deepens in the face of online competition. Topshop could survive if Green were to pump even more money into it or sell it, but the rest of Arcadia’s brands are too weak to compete, says Richard Hyman, an independent retail analyst in London. “I don’t think the dust is going to settle,” he says. “These businesses would need a magic wand to make them fully fit for purpose. It’s the most unforgiving market. It’s not cyclical—it’s structural.”

But Green can’t blame only structural woes for his dethroning. His talent was enlisting female celebrities to promote his brands, with Kate Moss as his most successful recruit. She scattered stardust over Topshop when she started designing a line of clothes for the brand in 2007 and went on to produce 14 sellout collections. Over the past year, however, Green has been hit by allegations of sexual harassment by former employees and fitness instructors, making him Britain’s most high-profile figure caught in the #MeToo scandals. The reports have damaged his standing among the female consumers he spent his life courting. Green declined to discuss the business or the allegations against him, telling one female Bloomberg reporter, “I’m not getting involved, honey. Sorry.”

Topshop’s Philip Green Met His Match With #MeToo

Green, 67, has been sparring with the media ever since his rise as a retail titan in the 2000s. He left school at 16 and began his rags-to-riches story buying and selling smaller chains before spending £200 million in 2000 to buy BHS, one of Britain’s best-known housewares stores that was ripe for a turnaround. Two years later he bought Arcadia for £850 million, largely financed by bank debt. The purchase gave him well-known British brands such as Miss Selfridge and Dorothy Perkins, which sell mid-market clothes to teenagers and younger women. In 2005, only three years after he took over the company, Arcadia paid a £1.2 billion dividend, partly financed by loans, to Green, paid out to his wife, Tina, a Monaco resident who paid no taxes on the windfall. Queen Elizabeth still knighted him for services to the retail industry in 2006.

Over the years, Green has been criticized for avoiding U.K. taxes by paying dividends to offshore entities. But his reputation took a serious blow in 2015, when he sold BHS for £1 to a little-known investor who’d had two bankruptcies. A year later, BHS went bust, leading to 11,000 job losses. It later emerged that the company’s pension pot was a £571 million black hole. The government’s pension regulator forced Green to cough up £363 million to replenish the fund. A parliamentary report on the collapse of BHS called Green the “unacceptable face of capitalism.” Soon after he sold BHS, Arcadia began to falter. In 2017 sales fell more than 5%, to £1.91 billion, and operating profits plunged 39%, to £131 million. The company, which is private, hasn’t released more recent numbers.

Late last year his image was sullied further when the Daily Telegraph reported that five former employees had accused a “leading businessman” of sexual harassment and racist abuse, which he’d covered up with high-priced nondisclosure agreements. Green won an injunction against the newspaper, but a member of the House of Lords revealed that Green was the mystery businessman facing the accusations, using parliamentary privilege to defy the court order. One female employee said he paid her more than £1 million after she complained about him kissing and groping her. Green denied the allegations of harassment and racism.

Green is also facing four counts of misdemeanor assault in Arizona, where he owns a home, after a 38-year-old Pilates instructor named Kathryn Surridge accused him of slapping her bottom and making sexual comments in 2016 and 2018. “He’s like an octopus,” she said in a 911 call, according to audio released by News 4 Tucson. “He’s the British Harvey Weinstein.” Green pleaded not guilty. A hearing in the case is scheduled for Aug. 23.

Competition is fierce from rival retailers with more innovative ways to lure shoppers into stores. Primark opened the biggest clothing store in the world in April in Birmingham. Its store in Manchester unveiled a Central Perk cafe to draw in teenage fans of the hit ’90s series Friends. By contrast, many Topshop stores look tired, with chaotic sales racks giving them the feel of thrift stores. Online rivals are beating Green in the fast-fashion game. Boohoo, which started in Manchester in 2006, sells trendy dresses, often for less than a quarter of the price of Topshop and with cheaper delivery options. Boohoo’s revenue surged 48%, to £857 million, in the year ended in February. Green is trying to correct his digital missteps. He’s promised to invest £60 million to revamp Arcadia’s online operation and agreed to sell Topshop clothes on Asos, the U.K.’s largest online-only retailer.

But the bullying and harassment claims may have made it hard for Green to retain the female talent he needs to turn the business around. Earlier this year, Karren Brady quit as chairman of Taveta Investments, the holding company that owns Arcadia. Topshop’s fashion director, Maddy Evans, defected to Marks & Spencer in June. The allegations also appear to have driven away the celebrity women who’d helped make Topshop one of the hottest names in fashion. His last major tie-up with a megastar was Topshop’s 2016 joint venture with Beyoncé to sell her activewear line, Ivy Park. She bought out Green’s share last year in the wake of the sexual harassment reports. In the fashion world, where Queen Bey goes, others follow.

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net

©2019 Bloomberg L.P.