Sir Philip Green plans to close 23 UK stores with the loss of 520 jobs as part of a financial rescue plan for his retail empire, which takes in Topshop, Dorothy Perkins, Miss Selfridge, Wallis, Evans and Burton.
The company is also asking landlords to accept rent cuts on up to 194 of its 566 UK and Irish stores in a rescue package that will involve the closure of all Topshop’s 11 US stores.
If a deal is not approved, Green’s Arcadia Group, which employs about 19,000 people, could face administration.
Ian Grabiner, the Arcadia chief executive, said the restructure was a “tough but necessary decision for the business”.
He added: “We have in place a well-developed turnaround plan for the group, which includes driving cost efficiencies and managing the refreshed retail store estate and investing in the continued development of our multi-channel proposition and logistics.”
The former billionaire Green’s business needs the support of landlordsto cut costs before its next rental payment in late June. The deal is controversial as Green’s family have taken more than £1.5bn in dividends and other payments out of Arcadia since buying it for £850m 17 years ago.
The company’s sales and profits have plummeted as it faces increasing competition from online specialists such as Asos and Boohoo, as well as Zara, H&M and Primark on the high street.
Green, who has not been in the UK since October, is said to be keen to wrap up an exit from the group. With his reputation in tatters after the collapse of BHS in 2016, only a year after Green sold it for £1 to a former bankrupt, and accusations of inappropriate behaviour, the entrepreneur has lost his appetite for the British high street.
Nick Bubb, an independent retail analyst, said landlords would be asking themselves whether they really wanted a probably worthless stake in a business that was likely to be lossmaking and had fallen out of favour with shoppers.
“It’s probably not got much of a future,” he said, suggesting landlords would think twice about backing the restructure plan. “Any option for [landlords] is bad. Maybe the least bad option is to establish the principle that retailers can’t just walk away from their legal liabilities.”
To persuade them to accept the deal, Arcadia is offering landlords a 20% share in the proceeds from any sale of the business and has promised to invest £50m in revamping and improving stores, as first reported by the Guardian. They will also have access to £40m in compensation.
Arcadia also wants to halve payments to its pension fund, which has a deficit of at least £537m, to £25m a year for three years.
But Green’s wife Christina, who is the formal owner of the business, has agreed to top up payments to the pension fund with £100m of additional cash over the next three years.
It is not clear whether the pensions regulator has approved that deal. But John Ralfe, an independent pensions consultant, said: “This is a good deal for the Arcadia pension schemes. If Sir Philip had chosen to put £100m into the BHS pension scheme before selling it in 2015, it wouldn’t have come back to bite him so ferociously.”
Arcadia will seek agreement from landlords for the restructure at a meeting on 5 June. They must approve seven separate insolvency procedures (CVAs) in order for the plan to go ahead. Each require the backing of at least 75% of landlords.
