Full year sales at Topshop and Topman fell 9.9%

Full year sales at Topshop and Topman fell 9.9%

UK high street fashion chains Topshop and Topman are largely to blame for the fall from grace of parent Arcadia Group, say industry watchers, urging the company to prioritise a revamp of the "two-star players" in order to return to profitability.

The retailer recently revealed it had swung to a GBP114.4m loss for the year to 1 September 2018, from a net profit of GBP144.8m a year earlier. Full-year turnover slipped 5.3% to GBP1.8bn, compared to GBP1.9bn the year before.

According to Chloe Collins, senior retail analyst at GlobalData, this marks a drop in total turnover of GBP86.6m – a decline of one-third on revenue five years ago. 

The retailer has blamed falling sales on increased competition from other high street and online retailers. And in May it announced the 50 store closures as part of seven Company Voluntary Arrangements (CVAs), along with a turnaround plan aimed at returning the business to growth. 

There has also been speculation it is looking to separate its retail brands ahead of a break-up of the group, which it has denied.

Collins says the results are "no surprise" and says Arcadia must continue to streamline its estate and shutter underperforming locations to protect profits and ensure that investment is better targeted.

"Miss Selfridge has proved itself to be Arcadia's weakest link, as it has failed to fight off stellar competition from online pureplays boohoo.com, PrettyLittleThing and Asos in attracting 16-24s. UK sales at the brand dropped 15.2%, with its place in the fast fashion market lost due to its inability to keep up with competitors in terms of speed to market, value and brand appeal." 

She also calls for a revamp of Topshop and Topman – which account for almost half of the group's UK sales, but saw a 9.9% fall in full-year sales.

"The group must prioritise a revamp of these two former star players. To regain relevance, it must invest in celebrity marketing campaigns that reignite desirability, as well as a refreshed fashion range with wider appeal among 16-34s," she says.

"With UK sales at Dorothy Perkins and Burton up 3.3% and 4.9% respectively, this is likely a reflection of their strong third-party presence on platforms such as Next, Very.co.uk and Asos, and Arcadia's previous reluctance to introduce Topshop and Topman to these sites has been a big hindrance for the group.

"With Topshop and Topman finally added to these propositions within the last few months, this exposure should now help the brands acquire new customers and stay top of mind. This is especially crucial with department store concession sales set to decline further, as Debenhams and House of Fraser close stores. With Arcadia's products now widely available on these third-party sites, it must continue to invest in its own websites to ensure its proposition can compete.

"Although the Boohoo Group is snapping at Arcadia's heels, building a retail powerhouse with its successful brand acquisitions, for Arcadia, splitting up the group may be the best option so that each business can better focus on improving its offer and adapting to the changing needs of their target audiences.

"Topshop and Topman complement each other well and justify being kept together, as do Dorothy Perkins and Burton, with their positive sales despite a challenging retail backdrop. However, the fate of Miss Selfridge, Wallis and Evans lies at risk, as they continue to drag down the group's sales and may struggle to find a buyer who deems them to have relevance and potential in today's market.''