Top Shop to Dorothy Perkins retail group Arcadia today said it was in talks to sell off five of its 14 fashion chains after a strategic review of the business.
The group said it was in discussions to sell off Warehouse, Principles, Racing Green and Hawkshead to a management buy-out team. It is also planning to sell Wade Smith, the Liverpool-based designer retailer.
Stuart Rose, Arcadia’s chief executive said: “The decision to simplify the business will enable us to focus on our core brands and the proposed sale of the niche brands takes us forward in this aim.”
He added he expected the deals to be completed in the near future, promising more news on Wade Smith “very very soon”.
Talks with Hilary Riva, managing director of Arcadia’s speciality business unit, and Peter Davies, managing director of the group’s multi-channel business unit, about the management buy-out were “progressing well”.
Rose joined Arcadia from frozen food retailer Iceland last November with a brief to turn the struggling group around.
Arcadia has run up net debts of more than £195m and has been hit by the increased competition among clothing retailers on the high street.
Rose’s predecessor John Hoerner had already begun a sell-off, closing Principles for Men, Richards and SU214.
Today, Rose said Arcadia would now be able to concentrate on delivering “better quality, better value, better service and more innovation” in the group’s remaining six brands.
Sales across Dorothy Perkins, Burton, Wallis, Topshop/Topman, Miss Selfridge and Evans, were up 2.9% over the six months to 24 February on 6.3% less space.
In the first five weeks of the current financial year, however, like-for-like growth across the six chains, increased by 6.5%.
The sales performance across the continuing chains helped Arcadia report a turnover of £1bn for the first half, just £37,000 below the figure achieved in the same period the year before.
Pre-tax profit, before one-off costs, rose to £29.1m compared with a loss of £8.6m, a figure at the top end of City analysts’ expectations.
Total costs fell during the trading period by 8.6% while gross margin increased by 1.7%.
Rose said much remained to be done to turn around the group, but promised Arcadia’s debt would be significantly reduced by spring 2002.
The group was also taking control of its Dial home-shopping joint venture with department store group Littlewoods, buying out its counterpart’s stake for £7.5m.
He said the move would give Arcadia “more control” over the business, which lost £3.5m in the first half.
The BrandMAX strategy put in place by Hoerner was on track to deliver the performance and profit improvements planned, he added.
Sales density had increased with the group’s trading space cut by over 800,000 sq ft.
Exceptional costs during the first half totalled £86.5m. Over £73.4m related to the writing-off of the goodwill associated with the purchase of the five brands Arcadia now plans to sell.
Including exceptionals, Arcadia made a pre-tax loss of £57.4m compared with a loss of £60.8m in the same period the year before.
The group said it would wait until a “sustained improvement” in trading before resuming dividend payments.
EGi News 05/04/01
