Topshop-owner Sir Philip Green is no longer listed as a billionaire on the recently-released Sunday Times Rich List, dropping from last year’s number-66 spot to the 156 position for 2019. The reason? The list – which is published every year by the London-based publication, ranking the 1,000 wealthiest people or families in the United Kingdom by net wealth – valued 67-year old Green’s Arcadia Group, as “worthless,” as the British high street empire is in the midst of sandals centering on allegations of sexual harassment, bullying and racial abuse, store closures and a bankruptcy filing in the U.S., stateside lawsuits with landlords, and mounting debut.
Despite an onslaught of legal problems and ever-diminishing returns, the Arcadia Group – which consists of household high street fashion names, including Topshop, Topman, Burton, Dorothy Perkins, Evans, Miss Selfridge, Outfit and Wallis – will live to sell another day. After a week’s delay and hours of discussions, Arcadia’s creditors agreed to a Company Voluntary Agreement (“CVA”) that involves rent cuts, 23 store closures and 520 job losses, but ensures the conglomerate’s survival, at least for the time being.
The rise (and ultimate fall) of the Arcadia Group started in the early 1900s, when a Lithuanian émigré, Montague Burton, arrived in Britain and set up his eponymous menswear business in Chesterfield, England. A move to womenswear came in 1946, with the acquisition of the Peter Robinson chain, followed by Topshop – which was launched as a “young fashion department” – in the mid-60s. Thereafter, Topman launched in 1970, and names like Evans and Dorothy Perkins were acquired and added to the budding retail empire.
When the Burton Group de-merged in 1997, the Arcadia Group was born. One of its first moves: acquiring women’s retailers Wallis and Miss Selfridge, as well as Outfit.
The growth of the Arcadia roster coincided perfectly with rising disposable income, more and more of which was being allocated by consumers to runway-inspired fast fashion garments, accessories, and footwear. At the same time, the outsourcing of manufacturing to countries with cheaper labor, such as China, Bangladesh and Turkey, made for staggering profits for retailers, such as those under the Arcadia umbrella.
When Mr. Green bought Arcadia in 2002, he expanded the group even further, bringing Topshop to the U.S., and China, in addition to a large number of franchises around the world. In a testament to the group’s success: in 2005 the Green family paid themselves a record £1.2 billion ($1.5 billion) in dividends in 2005, according to the Guardian. That same year, Arcadia recorded $2.26 billion in sales and nearly $410 million in profits – up 10 percent from the year prior.
To reach a broader base of consumers in the largely pre-e-commerce era, Arcadia was opening stores across the globe, rolling out nearly 100 stores in 2004 and nearly 50 the following year, and at the same time, was also acquiring others, including the UK retail stores of Etam and Tammy.
Fast forward to 2009, and the Arcadia-owned Topshop opened a sprawling brick-and-mortar store in New York’s Soho shopping district, followed by 10 other stores in key U.S. cities, such as Miami, Chicago, San Francisco, and Washington. D.C. Five years later, the British brand – which was being fronted by supermodel Kate Moss at the time – opened its doors on New York’s glitzy 5th Avenue with its very own flagship, while simultaneously stocking at Nordstrom stores throughout the country.
And in the midst of such success, Arcadia’s figurehead, Philip Green was knighted by Queen Elizabeth in 2006 “for [his] services to the retail industry.”
Yet, Arcadia’s seemingly meteoric global rise would not last much longer. By 2015, fates were changing – publicly – for the group. Its operating profit was down from $270 million in 2016 to $155.86 million in 2017, with total sales dropping 5.6% to just over $2.39 billion. The company blamed those falling figures on its “increasing switch from in-store to online shopping”, as well as aggressive discounting by competitors, rising business rates, and the new living wage.
But there was more to it than that. “According to fashion industry insiders, Arcadia’s decline cannot be blamed entirely on the way Sir Philip and his lieutenants ran the business; external factors, particularly the rapid rise of new, nimble competitors, played a significant role,” per the Financial Times, and formerly loyal consumers jumped ship.
Topshop, for instance – which was once a flagship fashion brand for millennials and the jewel in the Arcadia portfolio – is experiencing like-for-like sales falling about 20 percent per year as customers desert its tired mid-market fashion stores in favor of online fast fashion players, such as Boohoo.com, ASOS and Missguided. The other Arcadia brands, Miss Selfridge, Dorothy Perkins, Wallis, Evans and Burton, all peaked years ago.
Under Arcadia’s proposed CVA plan – which came about after Arcadia began pressing for a radical restructuring plan in May in light of stagnant sales and falling profits – New York’s 5th Avenue Topshop flagship will close along with all other U.S. outposts. This news follows from announcements in late March that 67 sites in the UK and Ireland had also been earmarked for shutting, meaning that many high streets will soon be out one specific player. As for the 194 Topshop stores that will remain, the rents will be reduced.
The challenge now for Arcadia is huge, given its dwindling performance over the last ten years. Competitors will continue to disrupt and innovate and so if Green has any ambitions for the long-term survival of his stores (and his group), he’ll need to make significant investment in the business. He will also, almost certainly, have to make further reductions in the group’s total number of UK stores.
Finally, as he will be aware, a CVA is certainly not a guarantee of retail survival. British Home Stores, Austin Reed and Toys R Us, among others, all went down the CVA route – but eventually failed.
Nelson Blackley is a Senior Research Associate at Nottingham Business School, Nottingham Trent University. (Edits/additions courtesy of TFL).