Sir Philip Green Arcadia closures to 'substantially exceed' 23 originally expected
Philip Green’s rescue plan reveals store closures and job losses will be far higher than stated
The number of stores set to close as part of Philip Green’s rescue plan for his Arcadia retail empire will be substantially higher than the 23 previously thought, with the Evans and Miss Selfridge chains likely to bear the brunt.
The number of closures will be at least double the number set out in the rescue documents, resulting in several hundred more job losses in addition to the 520 announced on Thursday.
The fresh blow to the high street coming from Arcadia came as the MP Frank Field, the chairman of the work and pensions select committee, wrote to Green to ask him to personally fill a huge gap of up to £750m in the Arcadia pension fund.
Green once paid himself a £1.2bn dividend – the biggest paycheque in UK corporate history – by loading the retailer with bank debt.
The extra store closures are detailed in the small print of the company voluntary arrangement (CVA), the insolvency procedure Green hopes to use to jettison loss-making stores and cut rents. He needs the plan to be agreed to save the wider group from collapse. It employs 18,000 people and has 2,600 UK stores.
Green is putting Evans’ and Miss Selfridge’s property holding companies into administration, which will result in the closure of another 25 stores. The two businesses have 107 stores and combined sales of approximately £200m. Both stores have been losing sales fast. In future the brands will look to grow sales by selling their ranges through other retailers’ outlets and online.
The document also stated that Green was open to selling “all or parts” of the group, according to the Topshop CVA proposal document seen by the Guardian. It adds: “Due to the intensely competitive environment [Evans and Miss Selfridge] will reduce their retail store portfolio significantly in the short term.”
Founded in 1930, Evans was the first high street brand aimed at plus-size women but in recent years it has come under attack as rivals such as Marks & Spencer and Boohoo went after its customers.
Miss Selfridge has been outflanked by arrival of cheaper rivals such as Primark and new online brands like PrettyLittleThing.
Arcadia also owns the Topshop, Burton, Dorothy Perkins, Wallis and Outfit brands. The company owns 2,100 stores but leases another 500.
The CVA proposal sets out the parlous state Arcadia finds itself in. The group was making nearly £220m in underlying profits three years ago . If the CVA is not approved, the document makes clear that the next step will be administration or liquidation. Sales at established stores are down 9%.
In the document Arcadia says it can no longer afford its £170m annual rent bill for its leased stores. Despite slashing £70m from its cost base in the last two years, it said it was not able to resolve its “significant financial difficulties”.
Arcadia also wants to slash the rents by up to 70% on nearly 200 other shops. And it wants to negotiate lower business rates payments.
The plan must be approved by unsecured creditors, who are owed at least 75% of its debts. It is closing its 11 Topshop stores in the US after failing to win over American shoppers.
A big stumbling block is the future funding of the group’s legacy pension funds,.
Field, who locked horns with Green over the controversial collapse of BHS three years ago, said he had written to Green asking him to stand by the group’s 9,500 pension scheme members given the funds’ “worryingly high” deficit.
“When a similarly grim situation arose for BHS pension scheme members, you personally provided funding,” Field said in the letter. “Might I please ask you to offer a guarantee to Arcadia staff that you would do the same for them should the deficit-reduction plan prove insufficient – and this time without the need for the regulator or parliament to step in first?”
Green handed over £363m in cash in 2017 to rescue the BHS pension scheme after months of wrangling with the Pensions Regulator. The deal followed the controversial collapse of the department store chain three years ago, which led to the loss of 11,000 jobs and left a pension deficit estimated at £571m.
Arcadia wants to halve payments to its legacy pension funds to £25m a year for three years as part of a rescue package announced on Wednesday. Green’s wife, Tina, who is the formal owner of the business, has agreed to top up the pension fund with £100m of extra cash over the next three years to help bridge a deficit that could balloon to about £750m if the company were to go bust.
The CVA requires the backing of the Pensions Regulator, which has already said the former billionaire’s restructuring plan does not adequately protect scheme members.
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