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Landlords clash with Arcadia over restructuring

Landlords are dragging their heels over Arcadia Group’s restructuring and are calling for a “formal and transparent” company voluntary arrangement (CVA) proposal, industry sources have told Drapers.

The Arcadia Group, which is owned by Sir Philip Green and comprises brands including Topshop, Miss Selfridge and Wallis, is understood to have sent a CVA proposal to some landlords last week.

The proposal detailed that if approved, the CVA would result in 57 store closures and the potential sale or closure of its international businesses, most of which are loss-making.

One property source said Arcadia is testing different proposals with particular landlords but is failing to win support for a CVA – for which an official formal proposal is expected in the next fortnight, if not sooner.

“They are trying to discuss and test ideas with different landlords and parties involved,” the source said. “But this the most amateurish attempt of an approach that we’ve seen. It is highly unlikely that it will get voted through at this point, as it’s not been transparent as other CVAs have been.”

Another source close to the situation said: “[Landlords] are not keen on it. However, it’s a bit of a chicken-and-egg situation with negotiations: landlords are saying they can’t make an informed decision without seeing a formal proposal.”

Drapers understands Arcadia wants to negotiate individual terms before releasing a CVA proposal.

 Arcadia has 571 stores and 388 concessions in its UK portfolio. Globally, the group has 2,211 outlets (991 properties) across the brand portfolio. Arcadia has a further 554 international franchise outlets.

Retail analysts suggested the sale or closure of Arcadia’s beleaguered international divisions would allow it to focus on and save its core UK operation.

“Arcadia needs to focus on its core business,” said Richard Lim, chief executive of research consultancy Retail Economics. “UK retailers such as Mothercare, New Look and Tesco all had huge international businesses and have had to scale back because they’re struggling.

“The international business is likely to spin off as a separate sale from the group and is key to saving its UK operations.”

Analyst Richard Hyman agreed: “All too often international has been pitched and assumed to be a guarantee of success in retail. It’s almost invariably positive, which is weird because history shows international retailing isn’t successful.

“The evidence is overwhelmingly in favour of poor performance because it tends to absorb disproportionate management time. If it can’t work in the UK, then what would make it work internationally?”

Arcadia Group declined to comment. 

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