CEO Philip Green is cautious about the year ahead

CEO Philip Green is cautious about the year ahead

UK fashion retailer Arcadia Group Ltd, owner of the Topshop, Topman, Wallis and Dorothy Perkins chains, today (18 November) said it is cautious about the year ahead amid signs that sales have slowed in the first weeks of its new financial year.

The retailer's owner, billionaire Philip Green, said looming increases in VAT rates, raw materials and some wage inflation meant he was cautious about the year ahead. But he added: "I will however look to grow the business both at home and overseas."

UK like-for-like sales grew by 1% in the first eleven weeks of the new year, down from 1.3% in the year to 28 August. Total sales of the combined group surged 40% to GBP2,777m on last year.

Pre-tax profits rose 6.4% to GBP213.2m, while operating profit climbed 10.4% to GBP279.6m (US$447m) from GBP253.3m a year earlier.

"I believe this to be a good performance in what was a competitive and challenging year," Green said. "Our leading fashion brands Topshop and Topman have again had a strong year producing record turnover and profit."

The Arcadia Group, which together with Bhs has some 44,000 employees, operates from 2,542 owned and 579 franchised outlets trading in 37 countries.

The two star performers in Arcadia's sales growth are its Topshop and Topman brands – both of which “really deliver on fashion and value for money,” according to Neil Saunders, consulting director of Verdict Research.

“Both fit well with the current consumer mindset and have significant potential for future growth internationally.”

Saunders also notes that profit growth “has outperformed thanks to very tight cost control within the business.”

He goes on to say: “In many ways, Sir Philip is the ideal leader for the current times: he understands the selling side and what consumers want, but is also operationally effective and keeps the business streamlined.”

“Fashion retail tends to work best in major locations from larger stores; smaller stores are nowhere near as operationally efficient. Such a move will help to improve profitability still further in what will prove to be a challenging 2011 for the consumer economy,” Saunders adds.