Phillip Green’s Arcadia group has announced plans to close 23 stores as part of its restructuring plan, affecting up to 520 employees.
The proposal will mean Burton, Dorothy Perkins and Topshop stores will close, in addition to rents being cut at another 194 stores. It added that the remaining 349 locations will be “unaffected by the proposals”, and the restructure of its business aims to ensure “long-term” sustainability in the current “highly competitive retail environment”.
It comes after HSBC agreed to stand behind Arcadia’s debts to suppliers, which have asked for advance payments since credit insurers withdrew some support this year.
HSBC has taken over security over Arcadia’s cash deposits, according to Companies House records, and The Times said that in return it is understood that the bank will underwrite letters of credit to Arcadia’s suppliers if required.
The retail group also recently announced it was also seeking to halve the annual contributions to the Arcadia Group’s pension scheme as part of its restructuring plan.
Ian Grabiner, CEO of Arcadia Group, said: “Against a backdrop of challenging retail headwinds, changing consumer habits and ever-increasing online competition, we have seriously considered all possible strategic options to return the Group to a stable financial platform.
“Following constructive discussions with all key stakeholders, we believe that a CVA is the best course of action to reduce our fixed cost base and ensure we can continue meeting our commitments to pension trustees, staff, creditors and our extensive supply chain for the long term, while continuing to serve customers through our portfolio of quality fashion brands.”
He added: “This has been a tough but necessary decision for the business. We will ensure all potentially affected colleagues are kept fully informed as we seek approval from our creditors on today’s CVA proposals.”
Daniel Butters, Partner at Deloitte, said: “Arcadia and its portfolio of iconic fashion brands have faced unprecedented market conditions in recent years, which have significantly impacted the Group’s financial performance. These CVAs will provide a stable platform for Arcadia’s experienced and committed leadership team to implement its turnaround plan and ensure the long-term sustainability of the group.
“We have fully engaged with all key stakeholders ahead of today’s announcement and believe that these CVA proposals strike a fair balance between the concerns of key stakeholders and the essential requirements to restructure the business.”
Green was considering proposing a CVA which would be launched in late April or early May, closing up to 67 stores. It also comes just over two years after he was forced to contribute £363m in pension payments to thousands of former BHS workers.