British retail Arcadia Group, which includes such well-known brands as Topshop and Topman went into administration on November 30. 

Deloitte became an appointed administrator, and up to 13,000 jobs at the company are now at risk.

What are the possible reasons for the company’s collapse? What does going into administration mean? And how will it impact the customers? Here, we take you through these questions.

Why did it happen?

The Covid-19 pandemic has brought with it many challenges for businesses around the world. But retailers whose digital adoption was slow and weak have been most affected. 

Ian Grabiner, the CEO of Arcadia, said that the priority of the company during a challenging period was “to protect jobs and preserve the financial stability of the group.”

“The impact of the Covid-19 pandemic, including the forced closure of our stores for prolonged periods has severely impacted on trading across all of our brands,” he added. 

Long before the pandemic, Arcadia experienced a significant drop-off in their sales, experts say. The company was struggling against online-only retailers such as Asos, Boohoo, etc. While competitors were developing e-commerce, Philip Green – who runs Arcadia – remained sceptical of digital platforms. 

Sofie Willmott, Content Head of Apparel of analytics company GlobalData, stated:

“Arcadia’s UK clothing market share has slumped 1.8 percentage points since 2015, to 2.7% in 2020, leaving it at the bottom of the top 10 UK clothing players, from fourth just five years ago, held back by its cumbersome store estate (despite Company Voluntary Arrangement in 2019) and controversial owner.” 

What does going into administration mean?

When a company becomes insolvent, it is put under the management of Licensed Insolvency Practitioners (IP), which is referred to as “going into administration”.

From this point, the current directors hand over control to the IP, which will run the business. The administrators will try to find rescue mechanisms to repay the company’s debts or solve its cash flow problems. If they cannot, they will try to pay as much of the company’s debts as possible from its assets. 

The administration process can last from a few weeks to a year or more, depending on the circumstances. However, the IP has eight weeks to write and present a rescue plan.

It is mentioned in the company’s statement that administrators at Deloitte are now searching for buyers for Green’s business.

“We will be rapidly seeking expressions of interest and expect to identify one or more buyers to ensure the future success of the businesses,” said Matt Smith, joint administrator at Deloitte.

Can customers still shop in Arcadia’s stores? 

According to the statement, Arcadia’s stores will continue to trade, its online platforms and all existing sales channels of the business will also continue to operate. All the online orders made over the Black Friday weekend will be honoured.

Arcadia manages 444 shops in the UK and 22 abroad. The company currently runs such stores as Topshop, Topman, Burtons, Dorothy Perkins, Outfit, Miss Selfridge, Wallis, and Evans.

Will gift cards still work? 

Topshop and other Arcadia shops will still accept gift cards, but they will cover only 50% of the purchase. For example, if a total price is £50, the voucher will cut it down to £25. Shoppers with a £10 gift card will have to spend £20. 

MoneySavingExpert Martin Lewis on ITV’s show ‘This Morning’ recommend using Topshop vouchers as soon as possible because the company does not have to honour gift cards when it is struggling financially. 

” I would go, and I would use them relatively quickly in case policy is changing,” said Martin Lewis. “I’d spend it in store […] because if you order online and something were to change, you wouldn’t get your delivery, then you would become accredited to the company. So, at least if you buy in store, you’ve got the tangible goods in your hand.”


Feature Image Credit: Visentico/Sento/CC BY-SA 2.0