Retail giant Arcadia in administration as Mike Ashley circles

Mike AshleyWith retail giant Arcadia now in administration, Gordon Fletcher of the University of Salford Business School looks at what has gone wrong for the former titan of the high street and its boss Philip Green.

Dr Fletcher comments: “As Cyber Monday began, the news of the imminent failure of the Arcadia group started gaining pace. The twist in this story is that the rumours started on Black Friday. It is the day when many retailers would move into the ‘black’ – in other words into profit.

“Arcadia’s failure is a significant blow to the high street with so many recognisable brands within the group. This is a significant rewriting of what we will experience in face-to-face retail in the near future.

“Some parts of the fallen empire will be retrieved but there are some immediate challenges. The fate of 13,000 employees, a £350 million pension shortfall and an estimated £250 million owed to suppliers all hangs in the balance.

“With such large numbers the fate of Arcadia will also have an impact on many other businesses across the UK. While the failure will be blamed on the trading position brought about by COVID-19 and the lockdown, the media reporting of Arcadia hints to the much deeper issues.

“Arcadia is personalised around its chairman, Philip Green. This is a textbook case study into the impact that different styles of leadership and management can have on a business. Arcadia’s brands have been slow to diversify into other countries or to make an exciting online offering – although Topshop’s 80% discounting on Cyber Monday is a headline in its own right – and have not kept pace with the contemporary fashion offerings of the online-only competitors.

“As a private company the focus appears to have been on the short term by reaping of dividends during profitable periods with no investment back into the brands themselves. Consumers do increasingly expect conversations and interaction with the brands that they want. If that investment has not been made to let that conversation happen then loyal consumers will look elsewhere. Arcadia and its brands are now paying the price for this lack of focus on the consumer and its ability to keep pace with the changing expectations of retail.”

The arcadia news has also rocked retail shares.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, comments: “It’s been a volatile trading session so far for Frasers Group as speculation mounts about the likely collapse of Sir Philip Green’s retail empire. If Arcadia Group does go into administration, Frasers Group is expected to go picking over the carcass, potentially to give a new lease of life to brands like Top Shop or Miss Selfridge.

“But Mike Ashley has already been on an expansion drive this year, buying into Hugo Boss and increasing the company’s stake in Mulberry, so there is some concern about whether Frasers Group can afford to go on another shopping spree right now.

“With chances high that there will be one less major competitor on the high street, shares in Marks and Spencer and Next have lifted amid hopes they could lure customers through their doors instead. Online rival Boohoo has also opened strongly.

“It’s another potential suitor for some of Arcadia’s brands, which would take them online only, if its advances were to be accepted. Given the accelerated shift to digital brought about by the pandemic, the surival of iconic brands like Top Shop is going to rely heavily on improving its e-commerce offering, to enable them to stand a chance in the highly competitive online fashion world.”

More to follow in the coming hours.