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Published
Nov 30, 2020
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As Arcadia fails, speculation mounts over its future, fears grow for its suppliers

Published
Nov 30, 2020

Arcadia went into administration late on Monday but the ‘light-touch’ filing means its 550 stores and website will continue trading, while current management will stay at the helm for now.


Topshop


Administrators from Deloitte said there will be no imminent redundancies or store closures. And the company is currently protected from creditors while a buyer/buyers for all or parts of it are sought. Sir Philip Green isn’t expected to bid for any of the assets.

As the UK fashion sector contemplates the failure of the Topshop owner, it has been estimated that its demise could mean £250 million worth of invoices go unpaid.

That figure comes from invoice insurance business Nimbla, which said that small and medium-sized enterprises supplying the group could be faced not only with immediate non-payment of invoices, but the amounts they’re owed also being completely unrecoverable over the longer term.

It said this will have a ripple effect and threaten the existence of hundreds of small businesses and jobs further down the supply chain.

Nimbla CEO Flemming Bengtsen said that while government actions have succeeded in staving off insolvency for many SMEs, they’ve also “created a wave of ‘zombie’ companies that have little realistic chance of survival. Arcadia’s collapse highlights the danger of a domino effect as defaults on trade credit trigger others to fail”.

FAILURE TO INVEST

Meanwhile, Jane Shepherdson, former boss of Topshop during its most successful period, said the immediate problems at the group may have been caused by the pandemic, but they stretch back further due to a lack of investment and a failure to recognise how important online would be.

She told the BBC that “the most likely scenario” for the firm is an acquisition by an online retailer with most stores likely to close.

She also expressed concerns for the overall supply chain saying “orders will start to be cancelled very, very shortly”.

And GlobalData senior retail analyst Chloe Collins added that “a break-up of Arcadia’s brands is the only way for survival”.

“Arcadia’s brands have been losing relevance for years and have suffered from a lack of innovation and investment — especially in digital, with this weakness being particularly exposed during the pandemic,” she said. 

“The best chance of survival for any of its brands is for them to be acquired separately, with each given the attention and investment needed to stand out in the competitive UK market”.

WHO MIGHT BUY?

She believes Topshop and Topman “will undoubtedly attract the most interest from potential buyers. Although their reputation as fashion leaders has dwindled since their heyday, as they have lost market share to more agile young fashion retailers such as Boohoo and Asos, they still have potential and would be missed by those who have grown up with the brands”.

Like other analysts, she feels Boohoo would be keen to buy them, especially as “Topman would really boost its menswear offer, which has always lagged behind Boohoo’s women’s brands, and Topshop could benefit massively from Boohoo’s social media prowess and influencer relationships”.

She sees Miss Selfridge as “a good fit for Boohoo” too, although she said it would need to be more clearly differentiated from the firm’s other brands.

It’s been reported that Frasers Group is keen to buy some of the labels as well, although Collins didn’t mention them. But she sees Next and M&S as possibly good fits for Dorothy Perkins and Burton, even though the latter could be less appealing due to the decline of formalwear in the pandemic.

And she thinks Wallis and Evans could struggle to find a buyer as they’re “tired and uninspiring. Wallis lacks a unique selling point and also suffers from a focus on workwear, whereas Evans has lost significance as a plus-size specialist as more fashion brands have expanded their ranges to cater to these shoppers”.

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