The former British high street fashion brand Topshop is on the verge of bankruptcy

2022-10-17 06:02

Reporter: Huang Shan

Editor: Zhou Zhuoran

Arcadia Group, the parent company of Topshop, may enter the bankruptcy liquidation process as soon as November 30 local time.

On November 29, the British Broadcasting Corporation (BBC) reported that Arcadia Group, the parent company of British fast fashion brand Topshop, may enter the bankruptcy liquidation process as soon as this Monday (November 30) local time.

A number of executives broke the news to the BBC that Arcadia was taken over as soon as Monday, which would endanger 13,000 employees, and the pensions of thousands of employees may be wiped out.

Arcadia Group is owned by Duke Philip Green, a highly controversial British businessman. This clothing retail giant owns several fashion brands such as Topshop, Topman, Miss Selfridge, Burton and Dorothy Perkins. The whistleblower said that they did not believe that any assistance deal would be concluded at a critical time.

However, Arcadia Group has received a £50 million emergency loan from British department store retail giant Frasers Group, which is controlled by British billionaire Mike Ashley. This huge loan will alleviate Arcadia Group's short-term cash flow problems.

In a letter to Arcadia Group executives, Frasers Group stated that this proposal will help the former retain thousands of employees, reopen hundreds of stores after the closure of the city, and guarantee the retirement of thousands of Frasers Group employees. gold.

Frasers Group did not require Topshop's parent company to provide collateral for the loan. However, once Arcadia Group or any of its brands enter the liquidation process, Frasers Group will immediately withdraw this loan proposal.

Currently, Frasers Group is waiting for the final decision of Topshop's parent company. Once Arcadia Group enters the bankruptcy process, it will become the largest British company that has closed down during the epidemic.

Executives within the Arcadia Group believe that this is not a problem that 50 million pounds can solve. "We can find 50 million pounds in five minutes." An executive told the BBC. "We raised 200 million pounds a year ago for business and pensions, but now it's unsustainable."

The new crown epidemic is believed to be the main cause of the bankruptcy of the Arcadia Group. The number of people infected with the new crown epidemic in the United Kingdom has been high for a year and has already had a huge impact on the consumer retail industry. Nearly 500 stores under the Arcadia Group were forced to close during the lockdown of the epidemic. In July this year, in order to reduce expenditure budgets in response to the epidemic crisis, Arcadia Group headquarters laid off 500 employees.

With the start of the second lockdown in the United Kingdom, Arcadia Group has overcome difficulties in trying to borrow 30 million pounds. However, many British media reported on November 26 (last Friday) that Duke Philip Green was not rescued by potential borrowers.

The new crown epidemic may be the last straw to crush Topshop's parent company, but this clothing retail giant has already had serious operating problems before that. In the 12 months ending in August 2018, Arcadia Group sales fell 10.5% year-on-year to 1.7 billion pounds, of which Topshop sales fell 20% year-on-year. In the 2017 fiscal year, Topshop lost 10.9 million pounds, and group sales fell 5.3% year-on-year to 1.9 billion pounds.

In mid-2019, Arcadia Group was on the verge of bankruptcy. Finally, after obtaining the approval of a number of creditors to support the company's reorganization plan, it barely managed to survive the bankruptcy crisis. Arcadia Group denied rumors that it would be split in September last year, saying that its restructuring plan is to implement a reorganization plan for its brands.

The overseas market has always been the weakness of Arcadia Group. The fundamental reason is the failure of its most famous fast fashion brand Topshop in the overseas market in recent years. In August 2018, Topshop announced the termination of cooperation with the Chinese agent and basically withdrew from the Chinese market.

In 2017, Topshop declared bankruptcy in Australia and closed all stores. The Arcadia Group has completely withdrawn from the Japanese market four years ago. Arcadia Group may also gradually close stores in the United States, Australia, Germany, the Netherlands and Ireland.

Topshop's difficulties in recent years are not only in the overseas market, but also in its home market. In the late 1990s and the first decade of the millennium, Topshop returned to the fashion circle with its unique design style and good quality, and became a popular high-street brand in Europe and the United States. At that time, Topshop became the first high-street brand to enter London Fashion Week . Fashion magazines regarded the clothes it designed as models of trends, and supermodels such as Kate Moss also launched a joint series with Topshop. By 2005, Topshop had reached an annual profit of 100 million pounds.

After 2010, Topshop's presence in the fashion industry has gradually diminished. On the one hand, Topshop has been defeated in the competition with many European and American high-street brands. Brands such as & Other Stories, Arket, Cos and Urban Outfitters have strong brand stories, while the two fast-fashion giants ZARA and H&M have strong brand stories. Have a powerful and fast supply chain system to cope with the rapidly changing market.

From 1999 to 2006, Jane Shepherdson CBE served as the brand director of Topshop and led the old brand to a resurgence. She believes that Topshop's strategy after she left has been on low prices, rather than providing consumers with the products they want. Shepherdson told British media Standard & Evening that Duke Philip Green’s business philosophy is “we only need to pay attention to how cheap we can sell products and how much we can sell.”

Except that the product is no longer attractive, Topshop is also not competitive in the online market. ZARA has long established a vertical supply chain that allows consumers to purchase in-store goods online, while Topshop lags far behind in the construction of omni-channels. Coupled with the rise of local fast-fashion e-commerce companies that are also positioned at low prices, such as Asos, BooHoo and Pretty Little Thing, Topshop has lost its appeal among the younger generation of consumers.

Lord Rose, former CEO of Topshop, told the BBC that splitting the Arcadia Group is the "only way" to continue going down.

Not all of its brands and structures will be sold. "If you are not important, you are likely to die."

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