Philip Green’s Retail Empire Arcadia Files for Insolvency
(Bloomberg) -- Philip Green’s Arcadia Group has filed for insolvency as the U.K. retailer buckles under pressure from the coronavirus pandemic, putting at risk 13,000 jobs.
The company confirmed in a statement that it had appointed Deloitte as administrator in the proceedings, a move that will allow the owner of brands including Topshop and Dorothy Perkins to seek protection from creditors.
Arcadia intends to keep its stores open and existing management will stay in place under the supervision of Deloitte, using what is known in the U.K. as a trading administration while it assesses all options for the business.
Chief Executive Officer Ian Grabiner said in the statement it was an “incredibly sad day” for the business. “The impact of the Covid-19 pandemic, including the forced closure of our stores for prolonged periods, has severely impacted on trading across all of our brands.”
It will be the U.K.’s most notable retail insolvency since the onset of the pandemic and a blow to the industry, which has already lost more than 125,000 roles since January. Arcadia’s sales have been hit by forced closures in 2020, part of the government’s plan to halt the spread of Covid-19.
The retailer was already struggling last year when it carried out a company voluntary arrangement, another form of U.K. insolvency, to close stores and cut rents in a bid to lower costs. Profit had fallen from 416 million pounds ($555 million) in 2013 to a 169 million-pound loss in 2018, when it last filed accounts.
Grabiner said that the company had hoped it could “ride out the pandemic and come out fighting on the other side” but it was impossible “in the face of the most difficult trading conditions we have ever experienced”.
Arcadia’s administration is similar to the measures taken by struggling department-store operator Debenhams in April, which allowed the company to stay in business while seeking a buyer or fresh funding.
Bidders are already circling Arcadia, which has declined an offer from Frasers Group for a rescue loan of as much as 50 million pounds, according to a statement from the company, which was founded by Mike Ashley. Frasers has also said it would be interested in buying the business if it fell into administration.
Any sale of Arcadia will be closely watched with a focus on the outcome for the retailer’s pension scheme. Green was lambasted in parliament in 2016 for the sale and subsequent high-profile collapse of another business he owned, the BHS department store group. He was criticized for placing the pension of current and former BHS workers at risk and enriching his family through the payment of large dividends. He eventually agreed to inject 363 million pounds into the BHS pension scheme.
“Within three months, the administrators have a duty to file a report on director conduct with the Insolvency Service, who will then determine whether a full investigation is required,” tweeted Business Secretary Alok Sharma. “I will be keeping a very close eye on this process.”
Shopworkers’ union Usdaw is seeking urgent meetings with Arcadia, Dave Gill, its national officer, wrote in an emailed statement. The union expects more than 200,000 retail job losses and 20,000 store closures in 2020.
“Each one of those job losses is a personal tragedy for the individual worker and store closures are scarring our high streets and communities,” he wrote.
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