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The British fashion chains Topshop and Topman ended their previous financial year with a loss of 505 million pounds (567,50 million euros) before tax. The group is now planning a major restructure, which will put thousands of jobs at risk.
From profits to deep pockets
Arcadia, the parent holding company behind the fashion chains Topshop and Topman, is in financial difficulties: in the previous financial year (until September 2018), the group dropped 137.5 million pounds into the red, compared to the gross profit a year earlier at 119.3 million pounds in the black.
Topshop, and the corresponding men’s label Topman, appear to be the major culprits: their profit before tax plummeted from a loss of 3.9 million pounds (4.38 million euros) last year, to no less than 505 million pounds (567.5 million euros) in losses. Turnover also collapsed to 847 million pounds (from some 952 million pounds), representing a 9% decline.
Substantial write-downs
The crash in profits is mainly due to one-off costs: the chains recorded 488.8 million pounds (549 million euros) in the 2018 financial year as a result of write-downs and rental charges on those stores making a loss. The costs attributed to dismissals also increased, with the fashion stores reducing the numbers of employees by 12% to 3,853 employees.
Heavy restructuring should now bring about recovery: since May of this year, the group has negotiated protection from creditors and Arcadia has also obtained approval from store owners to close stores and lower rents. 48 stores will be closed in the United Kingdom and Ireland, while 11 stores will be closed in the U.S.A. Overall, a thousand jobs are on the line.
On the hunt for a buyer?
The group has stressed that it believes in recovery and that the British formulas are among the strongest in the fashion market. Controversial owner Philip Green has emphasised that a new distribution centre has just been opened, that he continues to invest in digital and online activities, and that the retail group wants to expand into new regions via wholesale.
Still, rumblings continue within the group: after the news earlier this month that both the interim president and the COO have resigned, there were also rumours that Green wanted to sell various parts of his retail empire. Topshop and Topman would be among the contenders. In addition, there are also plans to place the American branches into liquidation.
