Why the potential downfall of Arcadia is ' significant and far reaching' amid high street shake- up
The hope must be that some sort of rescue deal can be hammered out for Arcadia and its thousands of workers.
Its challenges are not new but have been exacerbated by the devastating impact coronavirus restrictions have had on the whole of the UK retail sector.
In July, the group announced 500 job losses at its head office after it narrowly staved off administration. Early in the covid crisis it asked landlords for rent cuts and temporarily paused payments into its pension scheme.
If Sir Philip Green’s retail empire does become another victim of the pandemic and the seismic changes taking place on the high street it will be significant and far reaching.
There are very few main streets or shopping malls without a branch of Topshop,
Dorothy Perkins or Burton. Indeed, the group has more than 500 retail branches across the UK.
Richard Lim, chief executive at Retail Economics, the independent economics research consultancy, observes: “Clothing has been that the hardest hit sector with the disruption to the way we live, work and play undermining the need for new outfits for many consumers.
“However, their demise has been accelerated because of an online proposition that falls way behind that of their competitors. Years of underinvestment in the digital channel has severely restricted their ability to trade successfully through this hugely difficult period.
“If this business does eventually fail, it will leave gaps across many of our high streets where they have occu
pied shops for decades.”
It is understood that Green is considering a a process known as a light- touch trading administration, in which management would retain control of the day- to- day running of the business while administrators seek buyers for all or parts of the company.
Rivals such as Debenhams have also had it tough of late, with many others downsizing store portfolios or cutting jobs. The problems at Debenhams, which has closed more than 40 stores in the last 12 months, have had a knock- on effect at Arcadia because it is one of the department store chain’s biggest suppliers.
And there were reports that the problems of both have been added to by pressure from creditors wanting to call in debts while the retailers are cash- rich during the peak Christmas trading period.
While it would be one of the biggest the casualties of the pandemic if it collapsed, Arcadia is not alone.
This month, fashion chains Peacocks and Jaeger were placed into administration after owner Edinburgh Woollen Mill Group failed to find a buyer. And other retailers have been cutting jobs, including 3,500 at grocer Sainsbury's and 1,500 roles at John Lewis Partnership.
Amid the onslaught of online retailing and changing demographics, many experts have been forecasting the death of the traditional high street in the coming decade. Others talk of a reinvention of the town centre, with less dependence on retailing. The virus has accelerated that change dramatically.