// Arcadia Group reportedly in discussion with landlords over leases with rolling break clauses
// This means it could terminate a lease at any time during a term
// While landlords may be served 3 months’ notice, there’s still a chance new deals could be made to keep stores open
Arcadia Group is reportedly in discussion with landlords over leases with rolling break clauses, allowing the Sir Philip Green-owned retail empire to terminate a lease at any time during a term.
The news, as reported by PA news agency, raises concerns that some of the fashion giant’s stores could shut down permanently as a result of the coronavirus pandemic and in the wake of a string of closures in the past year.
While landlords may be served with three months’ notice, it does not necessarily mean Arcadia’s stores will close as new arrangements could be made to keep them open.
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It has not been confirmed how many stores or which of Arcadia’s fashion chains – which include Topshop, Burton, Dorothy Perkins, Evans, Miss Selfridge and Wallis – could be affected.
Arcadia declined to comment.
News that Arcadia could possibly serve notice on landlords to walk away from many of its 550 UK stores first emerged earlier this month, although details were scant at the time.
The retail empire, which had already been in financial trouble before the Covid-19 crisis and was in the midst of a major restructure, continues to seek ways to shore up its future.
All of its UK stores are currently closed due to the government-enforced lockdown brought about by the pandemic, while 14,500 of 16,000 Arcadia staff have been placed on the government-backed furlough scheme.
The firm has already demanded rent cuts from landlords due to the store closures and paused payments to its pension fund, which had a deficit of up to £727 million in 2018.
On the other hand, senior leaders took a pay cut of between 25 per cent and 50 per cent, with Arcadia chief executive Ian Grabiner opting to receive no salary or benefits until further notice.
Earlier this month the retail giant reportedly informed suppliers it would accept orders that were in transit on March 17 at a 30 per cent discount in a bid to avoid cancelling them entirely.
However, suppliers were also told that Arcadia would cancel all unusable orders and extend payment terms in a bid to stay afloat amid the coronavirus pandemic.
The company was reportedly facing a winding-up order as it cancelled payments to Principle System – which developed furniture and branding for the latest Ivy Park and Kate Moss collections for Topshop.
Meanwhile, the fashion giant reportedly approached banks and hedge funds about a new round of borrowing – worth up to £50 million – against its new distribution centre in Daventry, Northamptonshire.
Arcadia’s high street brands reported pre-tax losses of £505.1 million for the year to September 2018, according to its most recent accounts published on Companies House.
A series of CVAs were proposed in May last year as part of a wider three-year recovery plan, which led to the closures of 48 stores and rent slashes on many others before the pandemic took a hold.
The recovery plans also prompted Arcadia to place its US operations into administration.
After landlords voted through CVAs in June last year, Green and his wife Lady Tina were forced to offer some concessions funded from their own pockets to get approval for the measures.
In December, Green struck a £310 million deal with US private equity giant Apollo to remortgage the flagship Topshop store on London’s Oxford Street, ahead of the deadline set at the end of the year.
with PA Wires