Scandal-stricken Arcadia hires McKinsey to draft strategic plan

07 July 2017 Consultancy.uk

Arcadia, the parent firm of Topshop, Miss Selfridge and Burton among others, has brought in consultants from McKinsey to advise on a new strategic plan, with the group placing a new emphasis on e-commerce amid falling sales.

The profits of Sir Philip Green, chairman of retail company Arcadia Group – a business that represents Topshop alone buts also numerous other clothing brands including such as Burton, Miss Selfridge, Wallis, Evans and Dorothy Perkins took a serious knock in the fallout of the BHS scandal of 2015. Profits of Green’s holding company, Taveta Investments, subsequently experienced a 16% decrease to £211 million since last August, as sales fell by 2.5% after public outcry surrounding Green’s offloading of BHS for £1 – with the company collapsing a year later with a £571 million pension deficit, seeing 11,000 employees lose their jobs in the process.

In February, Green agreed to pay £363 million toward a bail-out the pension scheme which left many long-term employees facing uncertainty in their old age, however members of the UK Parliament called for the disgraced businessman to put more towards the “inadequate” fee, which left a £208 million gap still to fill. Green’s failure to do so led some to even call for his knighthood to be withdrawn.

Total sales for the group in 2016 were estimated at £2 billion, while the group had a cash stockpile of £223m, similar to the previous year, however, that still amounted to a fall in sales of 2.5%, as more customers turned their back on the high street. Underlying profit before exceptionals was higher at £253m. In order to boost online sales in response to the fall in bricks and mortar interest with Arcadia’s remaining brands, Green therefore recently sought the assistance of management consultants at McKinsey & Company.

Sir Philip Green - Arcadia

The Green family, who still remain fifth on the Sunday Times Rich List boasting a net worth of £2.8 billion, did not withdraw a dividend from Taveta last year, instead investing around £100 million in the development of the group’s online offering, along with overseas expansion of its brands. One such brand, Topshop Australia, which is currently under administration, has 9 shops, 17 concessions and 760 employees, showing exactly the scale of the task at hand. McKinsey meanwhile is expected to further the group's interest in digitalisation, examining the efficiency of Taveta’s huge portfolio of 40 online sites, while looking to increase mobile and international sales.

A shift to online shopping and warehouses while also sustaining the expensive shops around the globe could be the answer to Arcadia Group’s falling profits and revenues, which have recently hit a plateau. McKinsey declined to comment on their involvement with the beleaguered retail group. Despite the ongoing restructuring and the lingering spectre of the BHS scandal meanwhile, Arcadia was still named among the most desirable groups to be employed by in Britain, according to a recent survey of LinkedIn activity.

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