Philip Green attends the GQ Men of the Year awards
UK Press via Getty Images
U.K. billionaire Sir Philip Green has reportedly asked the landlords of his retail empire for rent cuts of up to 50% as the tycoon’s Arcadia Group faces revenue annihilation during the coronavirus crisis.
Green, best known for his Topshop chain, has in the past told Forbes that he favors a means tested rent and business rate measure in the U.K. to help save brick and mortar businesses that cannot compete with online retailers.
However, according to reports from British broadcaster Sky News, Green will “refuse” to pay the full rent amount Arcadia is due to pay next week.
One analyst told Forbes that the end is nigh for Arcadia, describing the coronavirus’ effect on U.K. retail as “difficult to survive” unless billionaire owners ”dig into their own pockets” to pay staff “through this turbulent period.”
Arcadia and Sir Philip Green declined to comment, but later announced that all stores would shut “until further notice.”
Sir Philip Green and Anna Wintour (right)
A Slow Death
Green has reason to fight for the future of his retail empire.
After successfully winning the battle to save his stores–including Topshop/Topman, Miss Selfridge, Burton, Dorothy Perkins, Evans and Wallis–in June last year, Green is now waging a new battle for which he could not possibly prepare.
For the first time in a long time there is a small portion of sympathy for Philip Green and Arcadia and their attempts to breath life back into a struggling empire.
Retail commentator Richard Hyman of Richard Talks Retail tells Forbes that the coronavirus pandemic is “obviously ruinous” for a lot of businesses and warns that better shops with solid fundamentals like John Lewis and M&S will also struggle.
Although having suffered seven days of isolation for corona-like symptoms himself, Hyman says that amongst the CEOs he’s spoken with (over the phone or by email), “store sales are 90% down and online 50% is down.”
On the issue of a rent reduction, he adds that Philip Green and Arcadia are not alone. “Very few businesses … can just leave their costs where they are and accommodate that kind of decline,” Hyman says.
Nick Grimshaw, Sir Philip Green and Harry Styles attend a private dinner celebrating the launch of … [+]
Sachin Jangam of Infosys Consulting is not optimistic about Arcadia’s prospects in weathering the coronavirus storm and questions whether a rent reduction is even enough. Jangam tells Forbes that Arcadia will find it “difficult to survive,” adding that Sir Philip alongside other billionaire owners will very likely “have to dig into their own pockets” to get through this “turbulent period.”
The appetite Philip and his wife Christina Green have for digging into their own pockets remains unknown. But over the last few years their estimated net worth has slumped (by over $3 billion) and their ability to rescue the Arcadia empire is limited.
At their peak in 2016, Forbes estimated the couple’s combined wealth to be $5.9 billion.
The lion’s share of the Green fortune comes from a dividend Arcadia paid to Green and his wife, Lady Tina Green, of $2.1 billion (£1.2 billion) in 2005. Back then business at Topshop was booming and few eyebrows were raised when Sir Philip paid himself what was at the time the biggest paycheck in British corporate history.
Since then the couple’s fortune has gotten smaller by the year, according to Forbes estimates, primarily due to a decline in value of their clothing retail business. They went from an estimated net worth of $4.8 billion in 2018 down to $3.5 billion in at the start of 2019 and $2.5 billion by July 2019.
Forbes estimates Philip & Cristina Green’s net worth today to be $2.1 billion.
Following the collapse of BHS, in 2017 Green was forced to pay $450 million to cover the firm’s pension deficit, despite having sold the chain. Even today, awkward questions remain unanswered over the exact size of Arcadia’s pension deficit, which one former senior politician claimed was between $660 million (£537 million) and $893 million (£727 million).
Forbes has learned that MP Stephen Timms, the new chair of the U.K’s Work and Pensions Committee, will take a renewed interest in Arcadia’s pension pot deficit upon release of the new fillings next September.
Jourdan Dunn and Sir Philip Green
For Arcadia and the reported refusal to pay landlords, Jangam of Infosys Consulting says, “Rent reduction will help, but whether or not Arcadia can survive really depends on the length of this crisis, and on employees taking voluntary pay cuts.”
He adds that business rates are a smaller percentage of Arcadia’s fixed costs, with employee costs another significant portion of their outlay–“and this will not go away.”
Green and Arcadia, he says, cannot merely blame the coronavirus pandemic for their decline.
In short, Arcadia dropped the ball from its dominant position before 2010. Arcadia, Jangam adds, “were slow to move to the digital age and to an omni-channel, personalised offering,” and failed to “transition” to online, while maintaining “relevance” both online and on the high street.
Anusha Couttigane, principal fashion analyst at Kantar, says the survival of these retail empires will depend on the time until social distancing measures are officially relaxed. An important point that shops simply do not yet know.
Retail expert Kate Hardcastle MBE tells Forbes that no business saw this coming, and all are vulnerable. But the ones that survive will be remembered for the role they played when times were tough.
Hardcastle says that there are examples of more dynamic brands “doing far more to make life for their consumers as bearable as they can right now” and these are the shops “when the good times come back” that people will return to.
Questioning the billionaire’s commitment to others–staff, shoppers, suppliers–she asks, “[is] Sir Phillip Green … anywhere to be seen in the community?”