Billionaire Rivalry Leaves Topshop to Fend for Itself

(Bloomberg Opinion) -- Billionaires Philip Green and Mike Ashley have long competed to be King of the High Street. Now their rivalry comes to a head over the fate of Arcadia, Green’s retail empire that includes crown jewel Topshop. The group is crumbling after being hit hard by coronavirus restrictions and the rise of digital shopping.

British chain Frasers Group Plc, in which Ashley is the biggest shareholder, confirmed on Monday that it had offered Arcadia a 50 million-pound ($67 million) loan to keep the company going. This was rejected, Frasers later said, and on Monday night Arcadia appointed Deloitte as administrator. The group will continue to trade while Deloitte finds new homes for its retail businesses.

It’s understandable that Green, known as “The Emp,” wouldn’t want to take a handout from “Little Emp,” as he refers to Ashley. But Green now faces the embarrassment of Arcadia being broken up and sold piecemeal. While some divisions will likely attract buyers, others will struggle to generate interest. Even Topshop, which had an enterprise value of 2 billion pounds in 2012, won’t be worth anywhere near that today.

The group, which also includes British household names such as Burton and Dorothy Perkins, represents the U.K.’s biggest retail casualty since the outbreak of Covid-19 shuttered shops and decimated spending in brick-and-mortar locations. It has 444 stores across the country, so a demise would leave a gaping hole on many shopping streets.

Arcadia’s administration could also mark an ignominious end to Green’s 50-year-long retail career.

There is no doubt that England’s lockdowns, including the most current one that hit the crucial trading period of November, were a final blow. But the company was struggling long before the pandemic.

Twenty years ago, Topshop was the place to go for cheap versions of catwalk looks. In 2007, it enlisted model Kate Moss to create a collection for the chain that was an instant hit. But in the intervening years, competition intensified. Cheap chic retailer Primark, owned by Associated British Foods Plc, now bookends Topshop’s flagship store at both ends of Oxford Street, London’s main shopping thoroughfare. Founded by the late Arthur Ryan, whom Green was close to, Primark now dwarfs Topshop, with sales of almost 6 billion pounds in the year through September — more than three times that of the whole of Arcadia in 2018, according to the latest accounts available.

The biggest challengers to Topshop, however, have been the online retailers Asos Plc and Boohoo Group Plc. Unencumbered by a big store network, they could match Topshop’s edgy styles and get trends to customers faster, for lower prices. Their strong digital presence meant they were able to capitalize on stores being shut.

Green has been a brick-and-mortar retailer fundamentally. But some 18 months ago, Arcadia went through a restructuring that shed dozens of stores and moved more investment toward selling through the web. Though there were signs of the effort paying off, the pandemic hit too hard. Things came too little too late.

With Arcadia’s 13,000 employees hanging in the balance, the administration is sure to evoke past controversies, including the 1.2 billion-pound dividend Green took from the company in 2005 — money that could have been reinvested to put the group on a surer footing today.

Its fate also has echoes of the 2015 collapse of British department store chain BHS, which Green sold for one pound a year before its implosion. He ended up personally contributing 360 million pounds to its pension plan, after lawmakers branded him as the “unacceptable face of capitalism.”

Like BHS, Arcadia has a big retirement liability. But Green has learned some lessons. As part of the 2019 restructuring the group’s ultimate owner, Green’s wife Christina, agreed to put 100 million pounds into the pension fund over three years. It still has a shortfall however. It would cost about 350 million pounds to secure the benefits with an insurance company, according to pensions expert John Ralfe.

Rival Mike Ashley could yet end up owning Arcadia’s assets. Frasers said on Monday it would be interested in a sale process. Expect it to be a billionaire bunfight.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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