Topshop and Miss Selfridge owner Sir Philip Green predicted a tough Christmas for the retail sector yesterday as his Arcadia empire reported a dip in profits.
“I think it’s going to be challenging,” the shopping tycoon said, noting high levels of promotional activity on the high street.
Arcadia, which also owns department store chain BHS, said underlying profits were 3 per cent lower at £148.1 million in the year to 30 August.
Total sales were up slightly to £2.7 billion, with the UK figure on a like-for-like basis broadly flat on a year ago, assisted by strong performances from the Dorothy Perkins and Wallis chains.
In the first ten weeks of the new financial year, underlying sales were down 1.2 per cent against last year as mild, wet weather has had an impact across the fashion world.
At BHS, which Green bought for £200m in 1999, trading has been challenging in a sector where conditions have been “very tough”.
Arcadia did not pay a dividend for the ninth year running, with the last payout in 2005 triggering a £1.2bn windfall.
The company said it continues to review its property portfolio in the UK, driven by the number of leases due to expire.
Over the last year it has closed a net total of 64 stores and 213,000 square feet of space, taking its current portfolio to 2,311.
It continues with the trial of three BHS food stores opened in the past year, which have traded favourably in the early stages of their development.
In the United States, the company opened three new wholly owned stores, bringing the total to seven, including its 40,000 sq-ft Topshop Topman flagship store on New York’s 5th Avenue.
Arcadia finished the year with £205m in cash, up from £75m at the end of its previous year, and Green hinted he may use this growing fund as firepower for a deal.
“It’s not a bad time to have a business in this shape. Who knows, we could be a buyer of something,” he said.
“Setting aside the cash, we could get money very easily. I like that flexibility just to be able to go left, right, and see if we want to do something.”
But he also said he was “absolutely not” working on any deals and added that no approaches had been received for BHS following speculation last year.
His comments came after rival JD Sports Fashion gave up on loss-making fashion chain Bank, agreeing a deal to offload the business to a retail turnaround firm.
Bury-based JD, which has owned the 88-strong retail chain since 2007, wants to prioritise investment on its sports retail operation.
The company has not disclosed the terms of the transaction with HMV owner Hilco, although it expects the substantial recovery of an intercompany loan.
JD’s fashion division, which includes the more successful Scotts brand, recently slumped to a half-year loss of £8.2m despite continued efforts to revive Bank under a new management team.
Bank was founded by Andy Scott – a former Macclesfield Town footballer – in 1994 and largely sells branded fashion items aimed at the youth market.
JD’s executive chairman Peter Cowgill said: “We have decided we must prioritise future investment in the sports fascias and consequently we believe that the sale of Bank is in the best interests of the group.”
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