Can The Topshop Parent Company'S Arcadia Group Rise To Life?

Arcadia, the fashion chain enterprise, originally planned to let Real Estate Company vote on its proposal to reduce rent, shorten the rent and reduce the number of stores. However, the proposal is obviously impossible to pass. After a week's vote, the vote was postponed, which led to the uncertainty of the future of the Arcadia group.

Creditors including Real Estate Company refused to accept the restructuring proposal of Sir Arcadia group and billionaire Philip Green sir.

According to the proposal, Green will reorganize the British fashion chain brand of Arcadia group, including Topshop, Miss Selfridge and Evans, but require creditors to reinvest 50 million pounds (63 million 800 thousand US dollars), in return, creditors will get 20% equity interest.

But after seeing the group's plummeting sales and many doubts about whether Green can revitalize the group, many creditors are not buying this proposal, especially in Real Estate Company.

Green was again accused of sexual harassment and "salted pig" behavior in the US, which further damaged its reputation.

Green denied the allegations of sexual harassment by a Pilates coach in Arizona.

Earlier this year, London's Daily Telegraph launched an investigation into Green's sexual harassment, bullying and racial discrimination. He also denied the findings.

This series of accusations has dealt a great blow to Green's reputation.

As a businessman, Green was awarded the Jazz title for his huge contribution to the retail industry. His brand also once occupied the fashion shopping center and became the most fashionable symbol of the fast fashion market in Britain.

Green is trying to get support from the real estate giant, including Land Securities and Intu, a shopping center operator.

According to sources familiar with the strategy of Arcadia group, the two Real Estate Company have decided to vote against Green's proposal before the group submitted a revised proposal on Friday.

According to the FT, British Land supports the proposal and has agreed to sign a better rent cancellation clause.

In an interview with BoF, Real Estate Company, which collaborate with several top shopping centers, said that it agreed to substantially reduce the rent of the Arcadia group, and that it would not be able to explain it to other tenants who paid the rent in full.

The negotiations between the Arcadia group and its creditors have sent a clear message to other distressed Retailers: bankruptcy is more valuable than survival.

Despite the Green scandal, Arcadia's problems lie in many mass market oriented brands and retailers.

Consumers' shopping methods have changed. Their favorite brands have mature e-commerce business and experience better but smaller stores.

The Arcadia group forecast a 9% decline in same store sales this year, which seems worrying, but similar to that of J.C. Penney (down 5.5% in the first quarter) and Gap (down 10%).

Green submitted a revised proposal on Friday.

According to the proposal, as part of the company's voluntary reorganization agreement (CVA, a form of corporate bankruptcy in the UK, allowing enterprises to continue to operate after substantially reducing their business), the Arcadia group will close at least 23 British stores and reduce the rental cost of nearly 200 other stores (totaling about 570) by 50%.

"We hope that the revised final provisions will enable most Real Estate Company to vote for our CVA agreement next week," Ian Grabiner, chief executive of Arcadia group, said in a statement.

Their support is crucial to the long-term sustainable development of the Arcadia group and its 18000 employees and loyal suppliers.

Creditors will vote in June 12th.

Green said he will invest in the field of e-commerce and set up a new distribution center, while allowing Topshop to enter online retailers such as ASOS to expand the scale of wholesale business, so that the Arcadia group is free from collapse. The collapse of the group will result in 18000 employees losing their jobs and about 570 independent stores closing down.

The group forecast that its performance will recover steadily, and the profit before interest tax depreciation and amortization (EBITDA) is expected to increase from 30 million this year to 80 million next year, to 117 million in 2021.

Taking into account the challenges facing the mass market which are too saturated, many retailers believe that rents are not necessary. Green is fighting against the inevitable fate.

In order to revive, some brands will no doubt choose to sell themselves.

The Real Estate Company, which cooperated with the bankrupt Sears, held similar views earlier this year. They supported the brand's bankruptcy liquidation process because they knew it could cooperate with the new and more successful tenants.

Even if Topshop and other chain members of Arcadia group can come back to life, many creditors doubt whether Green is the right person for the task.

The Green couple earned a lot of money through the Arcadia group, including the 1 billion 500 million dividend awarded in 2005, setting the highest dividend in the UK business.

Green lives luxurious, enjoys dealing with celebrities, and owns a luxury yacht, which is in sharp contrast to the lack of funds of the Arcadia group.

Green has repeatedly denied accusations of wrongdoing, which may only distract attention, but in the worst case, it may cause a fatal blow to the recovery of the Arcadia group.

The Arcadia brand and its 18000 British employees, who are about to lose their jobs in bankruptcy and liquidation, deserve a chance to reinvent themselves in an appropriate way.

But this is unlikely to happen at the moment when Green is in power.

Therefore, creditors are likely to veto its restructuring proposals in June 12th, and then find buyers for Topshop and other brands that Green can still bring back to life.