“Ultimately, however, in the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe.”
With over 13,000 jobs in jeopardy across a portfolio of well-known fashion chains, including Topshop, Topman, Miss Selfridge, Dorothy Perkins, Evans and Burton, Arcadia has been deemed the biggest corporate casualty of Covid-19 in the UK thus far.
But is that really true? Arcadia narrowly avoided collapse last year after creditors approved a company voluntary arrangement, which allowed it to close dozens of stores and reduce its rent on many more. At the time, Grabiner said the restructure put the company on “much firmer footing” going forward.
Like many decades-old retail businesses, Arcadia was grappling with the unsustainable costs of maintaining a too-big bricks-and-mortar presence long before Covid-19 arrived.
The doubts that analysts raised in the past – about the company’s lack of investment in digital and delivery, and the loss of relevance of even leading brands like Topshop with younger consumers – have turned out to be well-founded.
And some are now making a connection between Arcadia’s failure to evolve and reports of owner Sir Philip Green’s troubling behaviour over the years, including allegations of sexual harassment and racism, which potentially point to a bigger leadership and culture problem.
“The group’s downfall has been a long time coming,” said Chloe Collins, a senior retail analyst at GlobalData.
How Topshop lost its edge
Arcadia’s biggest problem, according to advisor and partner at Sydney-based retail consultancy The Growth Activists, Rosanna Iacono, is that it became complacent.
“Their long-time dominance in the UK market and relative geographic isolation gave them a false sense of security around the effectiveness of their business model and customer offer,” she told Inside Retail.
“They were stuck in the old-school rag trader mentality, when in reality the business of fashion has become much more sophisticated in the last decade, particularly in terms of digital strategy.”
The group’s missteps and missed opportunities can be seen most clearly perhaps in the downfall of its leading brand.
“It is striking to see how quickly Topshop lost its edge,” Phil Wiggenraad, a retail analyst based in Hong Kong, told Inside Retail.
“A decade ago, the brand had been Arcadia’s star performer, backed by several high-profile moves abroad to the US, Australia and the Far East. It was also a 50/50 partner for Beyonce’s Ivy Park fashion range.”
That is no longer the case. Beyonce took back control of the partnership in 2018, following #metoo allegations against Green, and Topshop stores in the US, Australia and Hong Kong have now all closed, after failing to gain traction with local audiences.
Meanwhile, the brand has struggled in its domestic market. According to GlobalData content head of apparel Sofie Willmott, Arcadia’s UK clothing market share was just 2.7 per cent in 2020, putting it at the bottom of the country’s top 10 clothing players. Just five years ago, it was fourth.
Analysts agree that the lack of digital innovation (Topshop has been forced to rely on third-party platforms, such as Asos and Zalando, for many of its online sales) and failure to keep up with the designs and prices of its younger rivals were key challenges. But part of the problem was also Green, according to Wiggenraad.
“Even prior to the allegations of sexual misconduct and racial abuse of Green against his staff, he was known as being a very abrasive personality in the boardroom. As a result, there was a revolving door of top management, which is not helpful at all when you need to turn a struggling brand around,” he said.
The best chance of survival for any of Arcadia’s brands is for the group to be broken up and sold separately, according to Collins from GlobalData.
“Topshop and Topman will undoubtedly attract the most interest from potential buyers,” she said. “Although their reputation as fashion leaders has dwindled since their heyday…they still have potential and would be missed by those who have grown up with the brands.”
Boohoo Group has emerged as a likely candidate to buy Topshop and Topman, though it would most likely result in the closure of all stores, while Next and M&S have reportedly shown interest in bidding for some of Arcadia’s brands, particularly Dorothy Perkins and Burton.
The administrators, Matt Smith and Dan Butters from Deloitte, are rapidly seeking expressions of interest and expect to identify one or more buyers, according to a statement. No redundancies have been announced, and all stores remain open and trading.