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Arcadia and Debenhams woes leave 27,000 jobs in the balance

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
A man walks past a Debenhams store in the main shopping street Oxford Street, ahead of the reopening of the non-essential businesses on Monday, June 15, as some of the coronavirus lockdown measures are eased, in London, Friday, June 12, 2020. The British economy shrank by a colossal 20.4% in April, the first full month that the country was in its coronavirus lockdown, official figures showed Friday. (AP Photo/Alberto Pezzali)
Experts say the fate of Debenhams is tied to Arcadia. Photo: AP Photo/Alberto Pezzali

The imminent collapse of Arcadia will have a “profound” impact on the UK High Street and puts thousands of jobs across the High Street at risk, according to experts.

Arcadia, which owns brands like TopShop, Dorothy Perkins, and Miss Selfridge, was said to be preparing to file for administration on Monday morning. The company has over 500 stores across the UK and employs over 14,000 people.

Experts said administration would likely mean wholesale store closures and job losses at the group.

“A lot of people would lose their jobs,” retail industry analyst Richard Hyman told Yahoo Finance UK.

READ MORE: TopShop-owner Arcadia could enter administration 'within hours'

Hyman predicted a fire sale of Arcadia’s assets after its collapse. Bidders would most likely “buy the stock, buy the brands, buy the websites... without any liabilities, without the stores I imagine,” he said.

Shockwaves could extend beyond Arcadia — the fate of Debenhams hangs in the balance too.

Arcadia’s brands have concessions within Debenhams department stores and analyst at Shore Capital estimate around 5% of Debenhams’ revenue comes from these pop-ups.

READ MORE: Arcadia troubles threaten Debenhams-JD Sports rescue talks

Debenhams is in administration itself and talks to revive the brand could be scuppered if Arcadia falls by the wayside. JD Sports (JD.L) has been holding exclusive talks with Debenhams’ owners about a deal but reports in the Sunday Times suggested these were souring due to the Arcadia situation.

“The impending collapse of Arcadia has cast serious doubt over the planned JD Sports rescue of Debenhams,” said Nick Bubb, an independent retail analyst.

Debenhams has already axed 6,500 jobs so far this year — around a third of its staff — and more roles could disappear if a buyer can’t be found.

If both those domino’s fall, it could do lasting damage to the UK’s High Street.

“The fallout from Arcadia and Debenhams both being in play will have profound implications, in our view, on UK high streets and shopping centres,” Shore Capital’s team of retail analysts wrote in an investment note.

“Potentially 124 Debenham stores (c9m sq. feet of selling space) and Arcadia’s c550 stores and concessions could disappear with up to 27,000 jobs at risk too.”

READ MORE: Arcadia's rivals cheer as TopShop owner nears collapse

Physical retail has been suffering at the hands of online shopping for years. The COVID-19 pandemic has accelerated and worsened that trend. Shops have been forced to shut during lockdowns, driving more business into the arms of digital players. Online sales have grown from around a fifth of all sales in the UK to a third during the pandemic, according to the Office for National Statistics.

If the likes of TopShop and Debenhams disappear, then people will have even less reason to go to the shops. It could prompt a doom loop that will be tough to recover from.

“Capacity disappearing could be double edged sword, as retail centres becomes less attractive with fewer comparative clothing retailers to shop, thus potentially impacting footfall,” Shore Capital said.

So far, public market investors are seeing Arcadia’s demise as a positive. UK retailing stocks were rising on Monday in anticipation of less competition and the opportunity to acquire Arcadia’s assets at knock-down prices. Whether the impact is beneficial in the long run remains to be seen.

Watch: Why are job losses rising if the economy is reopening?