Owner of retailers Topshop and Bhs, Arcadia Group, is set to close as many as 260 stores over the next three years, it confirmed in full-year results published today.
Profits before tax plummeted 38 per cent to £133.1 million for the group in the 52 weeks to August 27th 2011, whilst like-for-like (LFL) sales were down 1.8 per cent on the previous year and total sales fell 3.4 per cent.
Sir Philip Green, owner of Arcadia, said that current trading was proving extremely difficult and of the 450 or so store leases that are due to end in the next three years, between 250 and 260 are not expected to be renewed.
Margins were down 1.8 per cent on 2010, equal to £52.4 million, because of rising commodity costs and headline cash generated fell from £383.1 million last year to £297.4 million for this full-year.
Green commented: “Given the very challenging conditions both in the UK and around the world, I am pleased to report cash generation of £297 million.
“We remain a strongly cash generative business, enabling us to continue to invest in all of our Brands. We have invested £113 million in the last financial year, bringing our total investment over the last 5 years to in excess of £550 million.
“We have seen a small reduction in LFL sales together with a 1.8 per cent margin loss, having decided to maintain our prices and not to pass on any increases to our customers, absorbing such increases at a cost to the Group of £53 million. Costs have continued to be controlled tightly.”
Despite difficulties trading on the UK high street, Arcadia is still reporting growth in both its online and international operations.
Ecommerce sales rose 27 per cent year-on-year during the period and 21 international stores in 36 countries were opened during the 12 months, including its second US store in Chigago which will be followed by a third in Las Vegas in March 2012.
Neil Saunders, Managing Director at Conlumino, argued that difficulties seen by Arcadia highlight the pressure all parts of the clothing market are under, with such a big player unable to maintain sales despite the financial ability to absorb cost rises.
Saunders added: “As the Arcadia results show, one part of the clothing market that continues to grow rapidly is online.
“ This disparity between store and online growth justifies Sir Philip’s decision to reduce store numbers and consolidate his high street presence. Longer term, we believe that such a rebalancing will help to boost profitability.”
Current trading still remains very challenging for the retailer with LFL sales including VAT down 4.4 per cent in the first 12 weeks of the financial year but online sales growth remains encouraging at +21 per cent.