Sir Philip Green’s Miss Selfridge chain posted a £17.5m loss last year as sales fell and it wrote down the value of loss-making stores.
Sales at the youth fashion chain fell more than 15% to £102m in the year to 1 September 2018, while pretax losses more than quadrupled from £4.3m a year before.
Losses widened after more than £12m in one-off costs mostly related to property writedowns were added, as well as redundancies. The average number of staff working in the chain’s UK stores fell by about 300 to 1,188.
Miss Selfridge has since faced further job cuts and has closed its Oxford Street flagship as part of a rescue restructure of Green’s Arcadia Group, which also owns Topshop, Dorothy Perkins and Burton.
The history of Arcadia Group
When Sir Philip Green bought Arcadia, the retail group behind brands such as Topshop and Wallis, for £850m in 2002 he was already known as the king of the UK high street.
Green made his fortune by breaking up Sears, the group which once owned the Freemans catalogue and Miss Selfridge, before buying BHS in 2000. He became a household name after his family collected a £1.2bn dividend from Arcadia in 2005, the biggest corporate payout in UK history.
But in 2006 Topshop supremo Jane Shepherdson, the woman who put the brand on the fashion A-list, left amid rumours she was unhappy with Green’s management style. Her exit came just as Topshop teamed up with Kate Moss.
The Croydon-born model helped front Topshop’s expansion into the US in 2009 where Green pledged to build a billion-dollar business. Three years later US private equity firm Leonard Green bought a 25% stake in Topshop for a reported £350m.
Topshop and Arcadia’s other brands were slow to adapt to online shopping, however, and faced increasing competition from cheaper rivals, including Asos, H&M and Primark. AS sales fell, the group’s pension deficit rose. The collapse of BHS in 2016, shortly after Green had sold it to a serial bankrupt for £1, also dented his reputation.
Arcadia recently bought back Leonard Green’s stake in Topshop for virtually nothing. The group warned it could collapse if landlords did not back a rescue plan involving closing 50 stores and rent cuts. The plan was approved after landlords were promised a 20% stake in any sale of the business. The Green family also pledged to pump £100m into the group’s ailing pension scheme.
However, in November 2020, with the added impact of the coronavirus economic crisis on the ailing business, Arcadia finally collapsed into administration.
Sarah Butler
Arcadia has said Miss Selfridge will mainly sell online in future – and the dire sales figures indicate why the chain faced tougher cuts than some of the group’s other brands.
In May, the company said it planned to put the property holding companies of Miss Selfridge and its sister brand Evans into administration, resulting in the closure of 25 stores. But this action has yet to happen.
Arcadia is battling for survival after it admitted there was “material uncertainty” about its ability to continue trading without new funds, after slumping to a £177.3m loss last year – including Miss Selfridge’s poor performance.
The group’s flagship Topshop and Topman chains, which have about 350 stores worldwide, slumped to a £505m loss, as sales fell 9% to £846.8m in the year to 1 September.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as the coronavirus pandemic. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.
In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit and the coronavirus, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. Many businesses which deal with complex supply chains also want additional help with the new red tape and import charges imposed after Boris Johnson's Brexit deal saddled them with extra costs.
What is the government doing?
In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
Taveta Investments, the owner of Arcadia, said difficulties refinancing a £310m loan on Topshop’s Oxford Street store, due to expire in December, could mean it would have to raise new funds to survive.
Green’s retail empire, which is formally owned by his Monaco-based wife, Tina Green, staved off collapse in June after winning backing from creditors for a rescue plan that involved the closure of about 50 stores, 1,000 redundancies and rent cuts of up to 50%.
The group’s ailing brands have struggled to compete with rivals such as Asos, H&M and Primark after years of underinvestment.
