Arcadia is Unraveling

The fashion world can be cruel and unforgiving. London retail group Arcadia is quickly learning that lesson.

The clothing empire is on the brink of collapse in what could be the biggest British corporate bankruptcy of the pandemic.

A Thread Behind

While not a household name in the states, Arcadia is home to some of the biggest brands in British fashion including Topshop and Miss Selfridge.

But Arcadia’s threads have fallen on hard times: its share of the British clothing market has sunk from 4.5% in 2015 to just 2.7% in 2020.

• The conglomerate has yet to master the world wide web. Online competitors like Asos and Boohoo have snatched away market share while ecommerce remains a small portion of Arcadia’s sales.
• And with its 500+ stores closed between March and June, Arcadia lost its shirt in the pandemic. The company was forced to furlough retail staff and cut around 500 head office jobs in July.

After England initiated another month of lockdowns in early November, Arcadia made unsuccessful attempts to secure a $40 million loan to survive the winter.

Now Deloitte is expected to take over as administrator to the retail group as early as today, putting 13,000 jobs at risk and potentially prompting a scramble for Arcadia’s brands.

Former Arcadia CEO Lord Rose postulated that “people will come and pick over the carcass,” noting that there were “some tastier bits” and “some less tasty bits.”

The Emperor Has No Clothes

No discussion of Arcadia is complete without mentioning its controversial chairman, Sir Philip Green, a controversial dealmaker known for making the “the fastest £1bn in history.”

• Just three years after he bought the group for $1.1 billion, Green dished out a generous $1.6 billion dividend to its registered owner – his wife. That’s some professional accounting.
• In 2015, the Monaco-based billionaire infamously sold off department store chain British Home Stores for £1. The chain went bankrupt the following year, leading to the loss of around 11,000 jobs.

And last year the U.K. Parliament named Green the subject of several sexual harassment, racial abuse, and bullying allegations. He can now add “reigned over crumbling clothing empire” to his resumé.

The Takeaway: Arcadia’s stores will reopen this week when the lockdown ends, but they may not stay open for long. Analysts expect prospective buyers to shift some of Arcadia’s brands to online only.