Billionaire Sir Philip Green is facing yet another crisis over reports in the U.K. that his retail empire was set to become a major business casualty of the Covid-19 pandemic.
Sky News reported today that after failing to secure an emergency loan of around $40 million, Arcadia could call in the administrators early next week, putting 15,000 jobs at risk across Green’s retail chains which includes Topshop/Topman, Miss Selfridge, Burton, Dorothy Perkins, Evans and Wallis.
However, in a statement that arrived with Forbes in advance of the Sky News story an Arcadia spokesperson said that stores would open again next week: “We are aware of the recent media speculation surrounding the future of Arcadia,” adding “The brands continue to trade and our stores will be opening again in England and ROI [Republic of Ireland] as soon as the Government Covid-19 restrictions are lifted next week.”
The statement does not address claims that Arcadia needed emergency funding, or had planned to call on administrators Deloitte. The statement adds, “The forced closure of our stores for sustained periods as a result of the Covid-19 pandemic has had a material impact on trading across our businesses … the Arcadia boards have been working on a number of contingency options to secure the future of the Group’s brands.”
Julie Palmer, partner at restructuring specialist Begbies Traynor, says, “Sir Philip Green has used up his last lifeline, and administration may [now] be the inevitable destination for Arcadia.”
Sir Philip And The Pandemic
In a conversation with Forbes in 2019 Sir Philip Green was keen to stress the strength of Arcadia’s brands and the future of physical retail locations despite the growing popularity of online shopping.
However, the 2020 pandemic and subsequent lockdown across the U.K. upended Green’s recovery plans and and threatened the future of Arcadia’s 600 U.K. stores and outlets.
Since March Sir Philip has furloughed most of his 14,000 workforce and asked landlords for rent cuts of up to 50%, later cutting 500 head office staff in July.
That same month Green was also accused of passing down the financial pain of his struggling retail empire to low paid garment workers overseas after his Arcadia Group rushed to cancel orders at the start of the coronavirus pandemic. Scott Nova, executive director of the Washington D.C. based Worker Rights Consortium told Forbes, “We estimate, conservatively, that Arcadia canceled more than $300 million in orders globally, in response to the crisis.” Describing Arcadia in July as among the “worst actors in the industry, engaging in sweeping order cancellations when the crisis began, with damaging impacts on suppliers and workers across the globe.”
The Monaco-based billionaire has faced a torrid 18 months with allegations of workplace bullying, and legal action, since dropped, over an alleged sexual assault.
Green is not the only retail tycoon to have been blindsided by the twin threats of the pandemic–that have shuttered stores for months, and shattered consumer demand for clothing. Former billionaire Philip Day has seen his EWM group fall into administration, while department store Debenhams continues to close outlets across the country.
How Much Will It Cost Sir Philip Green?
The lion’s share of Sir Philip and wife Cristina Green’s estimated net worth comes from a $2.1 billion (£1.2 billion) dividend they paid themselves during the glory days in 2005, when Topshop's fast fashion, and low prices, wooed shoppers and turned Arcadia into a 2,000 store retail juggernaut.
Pension Black Hole
One potential (expensive) sticking point for Sir Philip Green is the widely-reported deficit in Arcadia’s pension pot. Pensions have long been a contentious issue for Green. In 2017 the tycoon faced repeated calls from politicians to be stripped of his Knighthood after selling U.K. department store chain BHS for £1 in 2015 with a hole in the pension scheme that later would cost him $461 million to settle.
In June 2019 Green and his wife Cristina agreed a deal with creditors–landlords, suppliers and its pension trustees–that would include topping up the pension pot with a single $133 million payment, and another $33 million per year for three years alongside a one-off $33 million contribution payment to cover the shortfall.
However their $2 billion net worth today has slid from $4.8 billion in 2018 as the value of Green’s retail empire has slumped precipitously. In 2019, when U.S. private equity investment firm Leonard Green sold its 25% stake in Topshop for just $1, the writing was already on the wall. Retail expert Richard Hyman toldForbes then that Arcadia was “worthless beyond the clearance value of its stock.”
However, in September 2019 one U.K. politician told Green to come clean over the size of the hole in his Arcadia group’s pension pot that he claimed was between $660 million (£537 million) and $893 million (£727 million).
Now a former member of parliament after losing his seat in the December 2019 general election, Frank Field MP told Forbes, “We know the deficit is bad or else the size of it would be published. The fact that it’s not published makes it doubly worrying, and I’ve written today to [holding group] Taveta to ask for that information.
“The truth is, he’s a billionaire on the basis of these companies, and these company's pensioners have the right to some of his billions.”