UK: Arcadia Group plans 250 store closures as profit drops
- Pre-tax profit down to GBP133.1m from GBP213.2m
- Sales down to GBP2.68bn from GBP2.78bn
- UK like-for-like sales down 1.8%
- E-commerce sales up 27%
The move was announced today (24 November) as the company said pre-tax profits dived 37.6% to GBP133.1m for the year ended 27 August, from GBP213.2m in the prior year.
Sales slipped 3.6% to GBP2.68bn from GBP2.78bn, while UK like-for-like sales fell 1.8% on the previous year. E-commerce sales were up 27%, while underlying retail like-for-like sales were down 4.3%.
Margin slipped by 1.8%, which owner Sir Philip Green said was due to the company's decision to maintain its prices and not pass on any increases to its customers. The move cost it GBP53m, he said, adding "costs have continued to be controlled tightly".
Green said trading conditions remain "extremely challenging" with "style, quality and value at the top of our agenda and more important than ever". The warmest October and November have made autumn trading much tougher, he added.
The retailer is forecasting that like-for-like sales will fall 4.4% in the first quarter, while online sales will grow 21%.
Speaking to the BBC, Green said the group will close up to 260 stores as the leases on some 460 stores expire over the next few years.
"We have got - from my memory - 450 or 460 stores where leases expire in the next three years. And I think on our latest summary we will close more than half of those on lease expiry. So I would say, I would expect us to close 250, 260," he said.
Arcadia's results underline the continuing pressure on all parts of the clothing market, said Neil Saunders, managing director of retail consulting firm Conlumino.
"Even stronger retailers like Topshop are faced with rising supply costs at a time when shoppers are demanding lower prices. The upshot is that to maintain sales momentum it is increasingly necessary to accept a hit on margins and profits.
"Unfortunately, consumer confidence is such that what's lost on margin cannot be easily be regained by higher volume sales.
"Ultimately, for those businesses with a robust proposition, this is a short term defensive move, a necessary sacrifice to maintain consumer loyalty and footfall during this challenging trading period," Saunders said.
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