Product, property and prudent management remain the key components of successful fashion retailing for Sir Philip Green, who has told Drapers he is in the market for doing deals.
Having released yearly figures that showed Arcadia Group sales to August 30 were up just 1% to £2.7bn and profits down 3% to £143m, Sir Philip stressed the business is very cash-generative and has plenty of money in the bank to spend, if the right acquisitions present themselves.
“We are in very good financial shape so we are ready to do things. We want to be active. We are in a very sensible spot,” he said. He would not be drawn on whether an overseas buy might be of interest. So far all of Arcadia’s concerns are UK-based.
Asked about the economic prospects for the UK in 2015, Sir Philip declined to be specific, but remarked: “It’s an election year, so that in itself will bring uncertainty. The unknown is worse than the known and it will be six months before we know who will be running the country.”
On the vexed subject of business rates, he said that the current system was “antiquated” and in need of reform. But he implied he could not see how the government - any government - could afford to lose the income rates provide in the current economic climate.
In the results release, Dorothy Perkins and Wallis were singled out for their performance. Sir Philip explained: “In the case of both of them, they did not have the product right during the previous year. On Dorothy Perkins, the offer was too core and it was getting attacked on too many sides. Now we have the product right, we have the supply chain right and it’s more fashionable.
“With Wallis, the merchandise has become very good-looking. Interestingly, we put it on the Debenhams website; it quickly went to be the second- or third-best seller without affecting our own business, so we must have got the product right.”
The notoriously technophobic knight agreed online is here to stay, but asserted: “People still want to shop in shops. They shop online to shop in shops. The key is to give them great product and great service in-store. Online is a sales tool in itself, but it is also a tool to sell more in-store.”
Some of the £94.5m set aside for capital expenditure during this financial year will be going on IT systems, with the refurbishment of Arcadia’s head office in Berners Street, just off Oxford Street, also claiming a share. The new HQ should be unveiled in September 2015.
A new Topshop store in Amsterdam - the first wholly-owned solus European store for the fascia - will be opened on February 26, but Sir Philip revealed the high cost of property in Germany had put him off expanding in Europe’s most prosperous country.
Further afield, expansion for Topshop in the US is “pre-ordained”, according to Sir Philip, with stores for Topshop already earmarked in Atlanta and Houston. More concessions within Nordstrom department stores will also be opened (52 Topshop and 55 Topman concessions are trading already).
“We have done a lot of homework and we have people to help us,” he said (US investment group Leonard Green and Partners has owned 25% of Topshop/Topman since December 2012). “We are looking at a lot of big cities - Frisco, Boston, Miami - it’s all down to finding the right property available. We’d like to see more open in 2015 and 2016.”
Shops are also being sought for Topshop in Beijing and Shanghai: “We’d like a couple of flagships in China in 2015.” But he played down the significance of Topshop selling on the Shangpin site in China: “It’s going OK, but it was never a big move and it’s not our ultimate move there.”
UK stores and Bhs
Back in the domestic market, Arcadia’s estate dropped by 64 stores to 2,311 in the past 12 months. The regular and unremarkable churn will continue, but Sir Philip was sanguine about the prospects for securing killer deals: “Everyone knows where the best centres and high streets are and everyone wants to be there. It’s only for the rest of the locations that you can have a conversation with the landlords.”
The performance of Bhs, where losses went from £19.3m to £21m in the past 12 months, remains “challenging”. Despite regular press speculation about a buyer taking it off his hands, Sir Philip assured Drapers he had not had a single sensible offer for the store business during the past 12 months.