Topshop owner Arcadia files for bankruptcy

UK retailerArcadia is seeking protection from creditors as it scrambles to save 13,000 jobs and brands such as Topshopafter clothing sales collapsed during the pandemic.

The company, which also owns Miss Selfridge and Dorothy Perkins, has entered administration, which is roughly equivalent to Chapter 11 bankruptcy protection in the United States, according to a statement from Deloitte, which will oversee the process. Deloitte said no redundancies were being announced Monday and stores would continue to operate.

“This is an incredibly sad day for all of our colleagues as well as our suppliers and our many other stakeholders. The impact of the Covid-19 pandemic including the forced closure of our stores for prolonged periods has severely impacted on trading across all of our brands,” Ian Grabiner, CEO of Arcadia, said in the statement.

The bankruptcy filingcomes as the UK economy grapples with a growing unemployment crisis and its worst recession in more than 300 years.

Major clothing retailers, including Marks & Spencer and Selfridges, have announced sweeping job cuts as a result of the pandemic, which closed stores for months and accelerated a shift to online shopping that was already hurting high street stores.

Arcadia, which cut 500 head office jobs earlier this year, was struggling even before the pandemic hit. The groupnarrowly avoided bankruptcy in June 2019 after it managed to renegotiate debt repayments and restructure the business.It closed some 50 stores across the United Kingdom and Ireland and all 11 of its Topshop and Topman stores in the United States.

Arcadia’s demise will further tarnish the reputation of its owner Phillip Green, once deemed one of Britain’s most successful retail entrepreneurs who was knighted in 2006 for services to the industry. A cloud of controversy has surrounded Green in recent years, following the collapse in 2016 of department store BHS, which he owned for 15 years before selling it reportedly for ￡1 in 2015.

After BHS went bankrupt, UK lawmakers said in a report that Green had weakened the company by extracting hundreds of millions of pounds for the benefit of his family, and voted to strip him of his knighthood. Under pressure from regulators, Green eventually coughed up ￡363 million ($484 million) to safeguard the pensions of former employees.

Frasers Group, the company led by British retail billionaire Mike Ashley that owns brands such as Sports Direct and Slazenger, said Monday that Arcadia had declined a “lifeline loan” of up to ￡50 million ($66.7 million) from the company. “Frasers Group were not given any reasons for the rejection, nor did Frasers Group have any engagement from Arcadia before the loan was declined,” it said in a statement.

According to senior apparel analyst at GlobalData, Chloe Collins, Arcadia has “been losing relevance for years,” investing too little in digital offerings and losing market share to online rivals such as Boohoo and Asos (ASOMY). “The best chance for any of its brands is if they are split out,” she told CNN Business. Boohoo, Next and Marks & Spencer could be among potential interested buyers, Collins added.

Arcadia said Friday it was planning to reopen stores in England and the Republic of Ireland when lockdown restrictions are eased on Wednesday. The company operates about 550 sites in Britain and Europe, and sells its Topshop Topman brands in Nordstrom stores in the United States.