Philip Green fashion empire crumbles

FT News


The high street fashion. Empire of Philip green is on the rocks. The UK retail I king has secured creditor support for three overhaul that's involve rent reductions store, closures, and to having of the company's pension deficit reduction payments, but will this be enough to save the business? Mafia Vinson discusses this question with Jonathan Ford and Jonathan Ely. Tell us a bit about Philip green and his fashion empire. How many stores all there in which are the best known brands? So the empire was put together from two big acquisitions that have Sears in one thousand nine hundred nine and nuts of Arcadia in two thousand and two Arcadia is, of course, the one that gives its name still to surf Phillips fashion empire four fifths of the revenues a made in the UK and Ireland from about five hundred sixty stores and they're all so concessions in department stores like Dem's and in some branches of Tesco now by far the best known of the Browns is top shop which counts for more than half of the sales, but there are also a series of smaller brands Burton, Wallis Dorothy Perkins, miss Selfridge Evans, being the main ones if my memory of back issues of vogue serves me talk shop was until. Recently regarded as something of a success, celebrities plumber into be associated with it gained to catwalk shows, and green was the person who is credited with getting it. But high profile on that level of success knighted for it. How is this managed to go wrong? So there are many causes a knife fits early into two buckets, if you like one is the sort of external factors over which Philip had relatively little control. And the other is the things that he did have influence and control over now outside his control was quite, simply the competition, much better. So back in two thousand and five when he was knighted, boo. A fashion retailer sells online and we'll turn over over a billion pounds this year did not even exist. And there's a whole series of those types of businesses have emerged who misguided, they sauce, people like that prime has really up to his game, h and. Am has opened hundreds of stores in the UK Zara has expanded quite aggressively in the UK. And also consumes have become much more kind to dispose to ordering clothing online something that seems a long time ago now but if you go back to the early noughties people were saying, oh, people will never order clothing, on my because they'll want to try it on. Well, they do try on. They try on at home and send back the bits they don't want, and then the things that he has done wrong. I think he basically took a lot of money out of Arcadia in the early noughties then famously paid his wife for one point two billion pound dividend didn't really invest enough act into the businesses that week online websites in their whole logistics, regarded as behind competitors and along with many other retailers from the sort of pre incidents era, they're finding now that they've simply got too many shops. So now so Philip finds himself as you say, with shops needing to close some of them leading to. Have the rent reduced on the others. Under the so-called company, voluntary arrangement. Can you just explain exactly what a VA is? And why he needed Sarah CVA is a peculiarly British form of insolvency that basically gives the company a window of opportunity to reach an agreement with its creditors to reduce its payments, and his overheads, and therefore is obligated, and actually any credits can be compromised under a CVA. But when it comes to retailers, it's almost invariably the landlords. That's are they face cuts to rents of between twenty five and fifty percents on about one hundred ninety four out of the five hundred also stores. They are the very significant aspects of this sceviour is that there is an agreement with a pension regulator Arkadiusz pension fund is about five hundred million pounds in deficit and the company had been making annual payments. To try and close that gap miss reached an agreement with the regulators, where it will reduce the payments, and so Philip, and his family will make good the difference, and that agreement with the pension regulates. The has very important political and legal ramifications should anything wrong with Arcadia further down the line, they still have to close certain outlets which talks about top shop, earlier, which other stores are going to be affected, or the CVA all of them all the chain. So twenty three stores will shots within the next year and that seems like quite low number out of five hundred sixty six but the reality, according to people in the commercial property world is the final number will be many more than not possibly into three figures that's because lots of stores are coming off lease anyway, and because over the three appeared of the CVA, there are lots of opportunities sort of written into the terms for either the landlords author Arcadia to end Elise early enclose a store. And that has raised questions really over the future of some of the other brands, we know already, the Evans miss Selfridge are going to move to a more wholesale type business model. So most of their stores will close one wonders how long things like Dorothy Perkins Wallis and Burson might lust because there's one marketing expert said to me last week if these stores didn't exist, would you go out of your way to invent them to have turn this round, if east Browns are not long for this world, even if he's able to have a little bit more success with top shop is there really a turnaround strategy Novus, while it's fair to say that many people think there isn't that what there is is too, vague into threadbare. So we know that he's basically plan to invest hundred thirty five million pounds over three years, roughly split half and half into improving the stores and improving the website and the online. Logistics the problem with that smaller a to really hundred thirty five million over three years

Coming up next