finance

Philip Green's empire was doomed by failure to move with the times


For nearly two decades Sir Philip Green has been Britain’s most famous, or perhaps infamous, shopkeeper, with a store on every major UK high street and in every shopping centre. But with his stricken Arcadia fashion empire expected to enter administration this week, the fashion group’s problems could mark the end of an era for the controversial businessman – and another lurch downwards for a high street stricken by coronavirus.

Green made his fortune in traditional bricks-and-mortar retailing, buying BHS and then Topshop owner Arcadia in the early 00s. Today, BHS no longer exists and the financial turmoil at Arcadia casts doubt over the future of its 500 stores and 13,000 staff.

Arcadia’s problems cap a year when more than 125,000 retail jobs have been lost and thousands of stores have closed as the property-based retail model that held sway for decades unravelled during the pandemic.

The 68-year-old businessman has been trying to extricate himself from Arcadia without loss of face for some time. The company only narrowly avoided administration last year when landlords backed a restructuring plan that involved closing 50 shops and shedding 1,000 jobs.

In the coming days Arcadia is expected to enter “light-touch” trading administration, which means management retains control of the day-to-day running of the business while administrators seek buyers for all or parts of the company. Struggling department store chain Debenhams took this route in April, although a rescue deal is still to be finalised.

“Green was one of the leading retailers of the time,” said a senior analyst who declined to be named. “But times have changed and he hasn’t moved with them. Topshop used to be a fashion icon, with the Kate Moss look and so on. It was a big deal.”

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But unlike international rivals such as H&M and Zara owner Inditex, Arcadia did not pursue major overseas openings, apart from a failed attempt by Topshop to break into the US and China, and critics say Green failed to invest in the business.

Topshop on London’s Oxford Street: other Arcadia brands have been neglected, say critics.
Topshop on London’s Oxford Street: other Arcadia brands have been neglected, say critics. Photograph: Yui Mok/PA

“Most of Green’s success was on the buying side, extracting cash,” the analyst said. “You’ve got Mike Ashley, who is arguably a similar character, but he’s in a position where he’s got enough flexibility on his balance sheet to take advantage of all the stuff that’s going on.”

In his 00s heyday, Green emerged as a rare businessman-celebrity. He shot to prominence in 2004 when he tried to take control of Marks & Spencer, with his tough business style injecting rock’n’roll and supermodels into the staid world of suits and share prices.

Green lost the M&S battle but got rich anyway, and for a time could do no wrong. He was lauded by the business community as his family banked monster pay cheques, including £1.2bn from Arcadia in 2005, the biggest payout in British corporate history. His rise was sealed when Tony Blair’s government granted him a knighthood for services to retail.

But in recent years the businessman’s critics have been busy trying to have him stripped of that knighthood.

Green’s reputation was shredded by the sale and subsequent collapse of BHS in 2016: he was eventually shamed into writing a cheque for its pensioners. Dominic Chappell, the man he had sold it to for £1, was recently sentenced to six years in jail for evading tax on the £2.2m income he received from the takeover. To add to it all, in 2018 Green faced allegations of bullying and sexual harassment, which he denied.

In a situation magnified by the pandemic’s closure of the high street, Green found himself out of time. New online rivals such as Boohoo and Pretty Little Thing had exploded on to the scene, just in time for shutdowns to send about half of all clothing sales online this year, according to the consultancy Retail Economics – up from 35% in 2019.

The runaway growth of online has “hammered” businesses, like Arcadia, that relied on large store networks and department-store concessions.

“Once people stopped thinking they had to go into a shop to buy clothes, fashion retailers knew they were screwed,” said the analyst. “Now it’s just a question of where the market settles.”

Five years ago Arcadia was the UK’s fourth-biggest clothing business. Today it’s number 10. Over that period its market share has fallen 1.8 percentage points, leaving it with just 2.7%, according to GlobalData.

“Arcadia has shrunk back to just Topshop,” said the analyst. “I mean, who ever talks about Dorothy Perkins? That used to be a big, big brand. The problem with Arcadia’s brands is they are not really brands. They’ve been allowed to wither on the vine.”

But as old empires fall, new ones rise, and rival Boohoo is on the up. Last year it snapped up Karen Millen and Coast, and industry sources say it – as well as Next and Asos – could be interested in buying Topshop.

Green’s abrasive style didn’t win him many friends in the boardroom, but it has won grudging respect. “He is one of the best dealmakers I’ve seen,” recalled one senior retailer. “I don’t think he is a particularly good retailer; he is good at buying and selling. He ended up being a victim of himself. When you want to screw everybody over all the time … nobody wants to buy anything from you.”

Recent retail casualties

Debenhams
The department store chain has been in administration since April with sportswear giant JD Sports a would-be rescuer. JD is thought to be mainly interested in the website, but analysts think it might take on almost half the chain’s 124 stores.

Edinburgh Woollen Mill Group
The heretofore successful retail group run by entrepreneur Philip Day has unravelled during the pandemic, with its brands, which include Edinburgh Woollen Mill, Peacocks, Jaeger, Austin Reed and Jacques Vert, all in administration. Day has been linked to a rescue of Peacocks and Jaeger but has been looking for a buyer for other brands.

Oasis and Warehouse
The fashion brands Oasis and Warehouse closed all their store operations with the loss of more than 1,800 jobs when they went bust in April. In the summer they were acquired by online giant Boohoo for £5.25m.

Laura Ashley
The famous clothing and furnishings retailer was one of the first casualties of the pandemic. The 67-year-old brand closed 70 stores in the spring but is set to return in 2021 through a new partnership with Next.



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