Sir Philip Green’s Arcadia facing collapse within hours
Sir Philip Green’s retail empire Arcadia, which owns high street brands Topshop and Dorothy Perkins, is reportedly on the brink of collapse this morning.
The retail group could become the latest casualty of the coronavirus pandemic and appoint administrators as soon as this afternoon, City PM understands, which would put 13,000 jobs at risk.
Mike Ashley’s Frasers Group confirmed this morning that it had offered £50m of emergency funding to Arcadia, and signalled that it could make a bid for the firm if it enters administration.
Frasers said it was awaiting a substantive response.
“Should the company and the Arcadia Group’s efforts to agree an emergency funding package fail and the Arcadia Group enter into administration, the company would be interested in participating in any sale process,” Frasers said.
This weekend, Arcadia said it was “working on a number of contingency options to secure the future of the group’s brands”.
“The forced closure of our stores for sustained periods as a result of the Covid-19 pandemic has had a material impact on trading across our businesses,” a spokesperson said.
Too little, too late?
Experts have said Arcadia, which has more than 500 stores across the UK, had been too slow to invest in its digital platforms and lost market share to e-commerce firms such as Asos and Boohoo.
Cameron Gunn, co-founder and senior partner of ReSolve, said: “Arcadia has had well-publicised financial struggles and utilised seven CVAs in late 2019 to help it manage its debt burden.
“It was at this time it announced it would be focusing on digital, which was definitely the right thing to do.
“Digital is incredibly important for retailers. What we have seen in the past several months is that the ones that have a strong online presence and know how to engage online with their customers are doing much better than those that underestimated the power digital and neglected to invest in it.
“In many ways digital is the only way to go, as evidenced by the TM Lewin brand deciding to solely having an online presence.
“However, in the case of Arcadia it may have been too little, too late with the likes of Boohoo, Asos and other online-only brands already eating up its market share.”
Unpaid suppliers
Analysis by invoice insurance firm Nimbla suggested that the collapse could leave Arcadia’s suppliers with a £250m unpaid bill.
Nimbla chief executive Flemming Bengtsen said: “Arcadia’s collapse highlights the danger of a domino effect as defaults on trade credit trigger others to fail. We estimate as much as £250m of unsecured debts will be left behind to Arcadia’s suppliers.”
“SMEs are in a precarious position; heavily leveraged and unable to withstand further stress to their business.
“They require their suppliers to offer credit terms as they cannot borrow more and in equal measure, they cannot afford for their debts to go unpaid.
“The average amount of bad debt SMEs said would tip them into insolvency was £30k before Covid-19.
“That number is undoubtedly much lower now. Arcadia sadly is just the tip of the iceberg as many more defaults can be expected in 2021.”