Deloitte named administrator as Arcadia collapses

03 December 2020 Consultancy.uk
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Arcadia, the scandal-stricken parent firm of Topshop, Miss Selfridge and Burton among others, has appointed administrators from Deloitte. The news comes after months of speculation regarding the future of the embattled firm, and puts more than 13,000 jobs.

Arcadia Group is a British multinational retailing company headquartered in London. It owns the high street clothing retailers Burton, Dorothy Perkins, Evans, Miss Selfridge, Topman, Topshop, Wallis and the out of town chain Outfit. At its peak, the group had more than 2,500 outlets in the UK, concessions in UK department stores such as Debenhams and Selfridges, and several hundred franchises in other countries. However, the firm has undergone a drastic change of fortunes in recent years – coinciding with the dramatic fall from grace of its Chairman, Sir Philip Green.

Green’s reputation took an irreparable knock in 2015, during the fallout of the BHS scandal. Green’s offloading of BHS for £1 led to the company collapsing a year later, with a £571 million pension deficit, seeing 11,000 employees lose their jobs in the process. The episode prompted public outcry, including numerous calls for Green to be stripped of his knighthood – and coupled with consumers increasingly shifting their attentions to online retail, Arcadia soon saw a swift decline in its revenues.

Deloitte named administrator as Arcadia collapses

A succession of restructuring programmes followed, along with a number of attempts to revive Arcadia’s floundering portfolio with the deployment of various digital tools – however, any impact this might have had seems to have been undermined by a massive campaign of asset stripping in the company. In April 2019, it was reported that the Arcadia group had recorded a £350 million deficit into its pension fund, while the Green family had cashed out £1.2 billion in dividends from Arcadia in 2005. Then-MP Frank Field, who previously investigated the BHS pension deficit, publicly criticised Green for this, stating he paid his family and friends "when things are going well," but made his employees pay "when things are not going well."

After a further year of crisis talks and attempted restructurings, Deloitte has been appointed to oversee Arcadia’s administration. The group trades from 444 leased sites in the UK, and 22 in other countries, and Deloitte insisted Arcadia's stores would continue to trade, while its online platforms would remain operational and supplies to concession partners would continue. It added no redundancies were being immediately announced – however, experts have since stated that more than 13,000 jobs could be at risk if a sale is not completed swiftly.

"We will be rapidly seeking expressions of interest and expect to identify one or more buyers to ensure the future success of the businesses," said Matt Smith, a joint administrator from Deloitte.

Green, who acquired Arcadia for £850 million in 2002, has issued no immediate comment, however, like many other businesses in 2020, his CEO was quick to cite Covid-19 as the key contributor to the firm’s demise. Ian Grabiner suggested that Arcadia had faced “the most difficult trading conditions we have ever experienced,” and that “the obstacles we encountered were far too severe" to recover.

Covid-19 or not, however, Arcadia’s pension scheme has long suffered from a massive black hole in funding due. As part of last year's restructuring Arcadia agreed to provide £210 million of security over property assets to the pension schemes, while Tina Green, who owns holding company Taveta Investments, and ultimately therefore Arcadia, agreed to contribute £100 million to the schemes over three years. However, this still leaves a multi-million gap to be filled, and if Green does not agree to plug it, it will likely be left to the UK Government's lifeboat scheme, the Pension Protection Fund.