LONDON, United Kingdom — During a year in which Philip Green’s reputation was savaged by UK lawmakers and tabloid newspapers, the financial performance of the billionaire’s fashion empire was deteriorating behind the scenes.
Adjusted operating profit at Green’s Arcadia Group Ltd. fell 16.5 percent to £211.2 million ($272.6 million) in the year ended August 27, accounts filed at the UK’s Companies House show. The company blamed increasingly picky customers and a general decline in spending on clothing as a proportion of UK household budgets.
Another factor was the collapse of Green’s former business BHS, whose department stores included concessions selling fashions from Arcadia chains such as Dorothy Perkins and Miss Selfridge. Total UK sales at Arcadia, which also owns clothier Topshop, fell by 22 percent to £1.73 billion.
The deteriorating state of Arcadia’s finances mirrors a decline in Green’s fortune, which this year has declined by $470 million to $3.1 billion, according to the Bloomberg Billionaires Index.
After selling BHS for a pound in 2015 to Dominic Chappell, a former race-car driver, Green appeared before UK lawmakers to explain why he unloaded the business without plugging its £571 million pension deficit. After months of haggling, Green agreed to pay as much as £363 million to compensate the chain’s 19,000 retirees.
Arcadia’s own pension deficit has more than doubled to £426.8 million over the last year. Green is paying £50 million annually for the next three years in an attempt to plug it.
Similarly to other store-based fashion retailers such as Marks & Spencer Group Plc and Next Plc, Arcadia is also grappling with the continued shift of spending online. The company recognised a £21.8 million charge for onerous lease obligations on loss-making stores and an £81 million charge for a deterioration in the value of its tangible assets.
By Sam Chambers; editors: Eric Pfanner, Paul Jarvis.