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Arcadia enters administration: UK retailer collapses following financial struggles

The Arcadia Group, owned by retail mogul Sir Phillip Green, includes high street retailers Topshop, Burton, Dorothy Perkins and Miss Selfridge. The group had been trying to avoid falling into administration but after a £30m ($40m) loan was rejected by lenders earlier in November, the prospect had seemed inevitable. There had been hopes of a last minute rescue deal but senior company sources told the BBC there was little chance. Administration will give the firm protection from creditors while it attempts to recover but, it is more likely to oversee parts of the business being sold off.

Arcadia has cited the pandemic as the major contributor behind its struggles. The initial UK lockdown and resulting store closures had a devastating impact on the firm with the group predominantly reliant on in-store sales. The easing of restrictions had alleviated financial difficulty somewhat but the fresh restrictions imposed from November 5th created further troubles for the group. The news puts 13,000 jobs at risk, including senior management, of which over 9,000 are currently on furlough. Additionally, there is the issue of an estimated £350m ($467m) hole in the firm’s pension fund which could have further serious implications for its employees.

The pandemic accelerated the shift to online fast fashion which Arcadia had failed to keep up with. Online pureplay fashion sites such as ASOS, Boohoo, Misguided and Pretty Little Thing have been surging in popularity in recent years. Arcadia’s full year results published in September 2019 demonstrate that the firm’s long term struggles with a loss of £170m ($227m) compared with £49.4m ($66m) in 2018 and a 4.5% fall in revenue in the same period. By contrast, ASOS published its financial year results to August 2020 and saw a 19% increase in revenue and retail sales and a 329% increase in pre-tax profit despite the pandemic.

The announcement of Arcadia falling into administration is likely to affect other high street retailers. Already, JD has pulled out of talks to save Debenhams after shareholders reacted badly following the Arcadia developments with a sharp fall in its share price. JD was the final remaining bidder for Debenhams, which is in administration for the second time this year, and a deal had looked hopeful but now the firm faces uncertainty. Arcadia had accounted for £75m ($100m) worth of sales in Debenhams, making it the biggest concession.