“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”Charles Darwin
This is a quote from Charles Darwin. He is describing the evolution of species but he could just as well be describing the evolution of businesses. Those businesses that do not change or who change “badly” will disappear. Change is necessary in order to survive.
Arcadia as many fashion retailers do not exist in isolation, they exist within a marketplace; competing with other firms, trying to attract new retain customers. We all know business fail, what the year of the pandemic has done is highlight the lack of adaptation businesses in my industry have done over the course of the last 10 years as fashion/retail has gone through a digital revolution. But let me not get ahead of myself.
A BRIEF TIMELINE
1903: 18-year-old Lithuanian immigrant Montague Burton founds The Cross-Tailoring Company in Chesterfield.
1910: The Cross-Tailoring Company’s headquarters move from Chesterfield to Leeds.
1914: By the time the First World War breaks out, The Cross-Tailoring Company has changed its name to Burton.
1929: Burton is first listed on the London Stock Exchange, by which time it has 400 stores, factories and mills and a large factory in Leeds.
1946: Burton acquires the Peter Robinson women’s fashion chain.
1952: The year Montague Burton dies, the company is the largest multiple tailor in the world.
1966: Burton is the official suit supplier of the England national football team for the World Cup in 1966.
1964: The Peter Robinson chain began a relaunch into the Topshop brand in response to the demand for new young fashion culture in Britain.
1974: The first standalone Topshop store opens, and the Peter Robinson name is eventually dropped altogether.
1985: Burton acquires Debenhams, then the largest department store group in the UK.
1991: The recession of the early 1990s takes hold, leading to a decline in sales across the clothing retail market. Burton eventually lays off 2,000 employees – almost 1,000 from its head office.
1993: Burton Group undertakes a major review of its trading space portfolio known as Townprint. At the time of the review, the group operates in the region of 1,600 stores, some of which had been with the group for some years and some of which were no longer performing adequately.
As part of the review, Burton began to roll out new ways of working, such as operating increasing numbers of combined stores, where several brands shared the same unit; these combinations (such as Topshop/Topman or Burton/Dorothy Perkins unit-shares) would continue to be developed through the 1990s and 2000s as a way of reducing overheads whilst maintaining geographical spread of the brands.
July 1997: Burton announces it will demerge Debenhams and separate it from the rest of the group.
January 1998: The demerger is approved by shareholders and takes effect later that month. Debenhams became a separate company with its own listing on the London Stock Exchange. Burton is renamed as Arcadia Group plc.
2002: Arcadia Group plc is bought by Taveta Investments, owned by Taveta Ltd based in Jersey. Taveta Ltd is owned by Philip Green’s family, the only director is Lady Tina Green, the wife of Philip Green. Arcadia Group becomes a private company and is delisted from the London Stock Exchange.
2005: Green bought the UK retail stores of Etam and Tammy, which were converted into other Arcadia retail outlets, with Tammy clothing subsequently being retailed through BHS and Outfit stores. Some of the stores not retained by Arcadia were taken up by other fashion retail groups, with Monsoon acquiring a large number of the outlets.
February 2009: Arcadia announces that the BHS department store chain, also owned by the Greens, would be integrated into Arcadia. As part of the changes, some BHS retail stores were to begin to carry Arcadia brands as concessions, enabling Arcadia to expand the presence of its brands without having to lease large numbers of new stores, allowing the firm to cut store costs by moving some operations from stand-alone stores into BHS locations.
2010: Reports circulate that Arcadia is considering a review of its property portfolio, as several hundred of the firm’s existing store leases expire over the coming three to five years. Analysts estimate that between 150 and 300 stores could be shut and replaced with new locations or integrated/combined stores. After Green confirms that the number of stores under lease was to fall in 2013-14, Arcadia begins shutting stores in a number of locations, mostly in small-to-medium-sized towns and cities. Arcadia cites the rise in online shopping and “destination” centres as a reason for moving away from high street locations.
March 2015: BHS is sold to Retail Acquisitions Ltd.
October 25, 2019: Green is named in Parliament by Lord Peter Hain as the prominent businessman accused of sexual harassment after The Telegraph was given a legal injunction to prevent his identity being revealed.
March 2019: Green is reported to be looking into a CVA to restructure the company. The plan is feared to lead to more shop closures and job losses.
April 2019: Two restructuring specialists are added to the Arcadia Group’s board to oversee the implementation of the CVA.
April 2019: Reports emerge that Arcadia group has recorded a £300m deficit into its pension fund, while the Green family had cashed out £1.2 billion in dividends from Arcadia in 2005.
May 23 2019: Arcadia Group confirms it plans to close 23 stores across the UK and Ireland with the possibility of further closures worldwide as part of a CVA. The retail group’s proposals also look to cut rents at another 194 stores, with all 11 of Arcadia’s Topman and Topshop stores in the US also set to close.
May 28 2019: Green offers to provide £185 million in additional funds from property assets to help reduce Arcadia Group’s pension deficit as part of a bid to win approval for its seven CVAs.
June 12 2019: Arcadia Group announces that its CVAs have been approved by the required majority of creditors. Lady Green will pay £50 million into the group as long as it means there will be no risk of legal challenge to the CVA.
Sept 2019: Arcadia reveals a £177.3m loss for the year to September 2018 – its most recent public results statement – including half a billion pounds lost at Topshop.
March 2020: The coronavirus pandemic hits. Arcadia closes all its stores across the UK as the first national lockdown begins. In April, Green puts 14,500 employees on the government’s job retention scheme, which supports the wages of furloughed workers.
July 2020: Arcadia announces 500 management job losses as it tries to cut costs.
November 30th 2020 Arcadia goes into administration.
Where to begin? While the Arcadia of today is fundamentally tied to Sir Philip Green, the company founded by Montague Burton in 1903 has endured many trials in its chequered history to become one of the mainstays of British retail. The group represents Topshop, Topman, Miss Selfridge, Burton, Evans, Dorothy Perkins and Wallis, as well as c.18,000 members of staff.
On the surface, the timeline above shows a retail giant determined to survive despite change at every element of its business. But beneath that, it could be argued Arcadia’s current issues date back through the decades. What seems clear now is that Arcadia has had too many stores for more than 30 years, while its key competitors such as Asos and Boohoo have remained entirely online-only, never branching into bricks and mortar. Remember the digital revolution I mentioned? A decade ago online sales accounted for 3% of global retail sales, in 2018 that figure sat 12% and is projected to double to 24% in 2023, key to note this projection was pre-COVID. What the pandemic has shown us is that those retailers not well on the road to a full digital adaptation will be left behind or in a position where their continued presence on the high street is untenable.
Now, we regurlarly see & hear voxpops whenever a ‘great’ high street name is in trouble about the demise of the ‘Great British High Street’ but I would counter argue that it’s clear we as consumers are changing our behaviour and retailers haven’t moved with us. Instead of shrinking their physical presence and looking at ways to make the what remains of their estate seamless interrogate with their online proposition. Change is inevitable, the second point is that the stimulus for change is always external, and lastly there will be always an element of resistance to change. Arcadia in particualr is guilty of several modern major retail sins… having too many stores, too many stores in proximity (both of which the group identifed in the 90s) and a lack lustre online retail experience which clearly was an after thought. You layer that in with Sir Philip Green’s recent reputation and consumers shifting to conscious/sustainable fashion and you create a toxic cocktail.
Could Arcadia of changed? Well, personally I think this is where it’s hubris got in the way, where the old adeage “Too big to fail” came into play. However I think the crucial issue with Arcadia is that it had become too big to change. Where it’s competitors had got agile and nimble they had become the Titanic of retail with a rudder to small to avoid the iceberg which had been spotted years ago.
I remember once in a planning meeting with my then Harvey Nichols Financial Director being reprimanded as me and my colleague attempted to explain the impact of online and digital expansion to our business. The phrase that got us in trouble…
We need to think of our stores as posh warehouses with Michelin Star cafe’s. They ultimately will be servicing our online demand to ensure we don’t end up in a financial hole.Me – 2013