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Arcadia profits fall as Sir Philip Green confirms mass store closures

Sir Philip Green’s Arcadia fashion group experienced a profit slump in the year to August 28 as the retailer confirmed mass store closures on the high street.

Group pretax profit dropped £80.1m to £133.1m. Margin declined 1.8%  - equivalent to £52.4m -  as the retailer absorbed costs rather than pass them onto the consumer.

The retailer said it generated “robust headline cash” of £297.4m, although that was down from last year’s £383.1m.

Total UK VAT inclusive like-for-likes slipped 1.8% on last year while underlying retail like-for-likes were down 4.3%.

Arcadia has 480 leases coming up for renewal in the Next three years, and boss Sir Philip Green said he expected to close between 200 and 300 of those.

Arcadia has 2,507 company-owned stores overall.

Green said current trading has suffered in the warmest October and November on record. He said trading in autumn was “much tougher”, adding that like-for-likes since year end fell -4.4%. Internet sales grew +21%. 

He said: “Our young fashion brands Topshop, Topman and Miss Selfridge are trading positively.

“Trading conditions remain extremely challenging, with style, quality and value at the top of our agenda and more important than ever.” 

Total sales came in at £2.68bn in the year while e-commerce sales increased 27%.

Arcadia invested £112.8m into the business in the period, and ended with year end bank debt of £444.5m.

Green said: “Given the very challenging conditions both in the UK and around the world, I am pleased to report cash generation of £297m. 

“We have seen a small reduction in like for like sales together with a 1.8% margin loss, having decided to maintain our prices and not to pass on any increases to our customers, absorbing such increases at a cost to the Group of £53m. 

“Costs have continued to be controlled tightly.

“We remain a strongly cash generative business, enabling us to continue to invest in all of our Brands. We have invested £113m in the last financial year, bringing our total investment over the last 5 years to in excess of £550m. 

“We remain excited by our developing International business with 600 franchised outlets now operating in 36 countries, with 21 having been opened in the last year. Our second USA store opened in Chicago in September and our third in Las Vegas is due to launch in March 2012.”

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