Apr 6, 2020
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Arcadia could permanently shut many more stores - report

Apr 6, 2020

It's believed that Arcadia could need to close many more stores than it had planned to as the coronavirus crisis continues to crush UK fashion retail. Its 2019 CVAs included clauses allowing extra closures to happen. 

Image Sandra Halliday

And a report at the weekend also said that a company has filed a winding up petition against the group. 

The Topshop owner, which is controlled by Sir Philip Green and his family, could close dozens more UK stores as trading conditions prove to be a breaking point for the viability of some locations. 

The FT reported that the terms of the rescue plan agreed with its creditors last summer allowed for many more stores than the originally-planned 22 to close. But a company spokesman said “no decisions have been made at this time”. 

The firm’s webstore is operating, although this will be providing only a small revenue stream as the company’s online sales are much smaller than those of some rivals. 

The company’s series of CVA deals struck last year allowed it to move from a quarterly rent payment schedule to monthly payments, with lower rents on many locations. The deals also included clauses that would allow either the company or its landlords to break leases at certain relatively short intervals. Some of the shops where this was allowed have already closed. 

The retailer is doing everything it can to preserve its cash flow and currently has the majority of its staff on furlough. It has also reached a deal with the pensions regulator and its pension scheme trustees to defer a pension fund payment designed to help with its deficit.

Meanwhile, as to that winding-up petition, it came from Principle Systems, a subsidiary of marketing company Principle Global. The company had developed furniture and branding for several high profile collections at Topshop (such as Ivy Park and Kate Moss) and “continues to work closely with the Arcadia team on their ongoing programmes”.

While such petitions can happen relatively frequently and are usually resolved, it's a further sign of the pressures retailers and the businesses they work with are under at the moment. 

Those pressures are being seen most acutely in the supply chain with many big retailers having cancelled orders, sometimes even when they were on their way to the companies. 

A letter from Arcadia seen by The Sunday Telegraph has said that the group “reserves its right” to cancel orders and it has changed its payment terms from 60 days to 90 days.

But all the cancellations aren't only about cash preservation as many retailers will be facing capacity issues. With stock no longer being delivered to stores and most of it not being sold at present, this severely reduces the space available for retailers to accommodate incoming goods.

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