Debenhams’ jobs in danger in fallout from Arcadia collapse 

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Debenhams is heading for oblivion today after 242 years of trading with 12,000 jobs set to go after JD Sports scrapped its proposed rescue deal following the collapse of Sir Philip Green’s Arcadia group as Rishi Sunak declared the Government ‘stands ready’ to help.

The latest disaster for the UK’s ailing high streets already decimated by coronavirus came as Sir Philip was urged  to do his ‘moral duty’ and sell his £100million superyacht to support his 13,000 Arcadia staff before Christmas and bailout the £350million black hole in their pension pot. 

Mr Sunak told the Commons this afternoon said the Government will support the 25,000 workers in ‘deeply worrying’ times and said: ‘There are negotiations between various parties and the companies at the moment – particularly with regard to pensions – and it wouldn’t be right for me to comment specifically on those’. 

The Chancellor’s offer of help came days after he used his spending review to commit the Government to spending £1trillion for the first time and revealed that borrowing would hit almost £400billion this year as he pays for the UK’s response to coronavirus. 

It is not clear from Mr Sunak’s statement whether taxpayers’ money will be offered to Arcadia or Debenhams – or their pension schemes – but the 25,000 people they employ will be eligible for benefits if they are made redundant. 

Debenhams has said it will continue to trade in its 124 shops and online with a fire sale of its stock when the national lockdown ends tomorrow, on a shopping day being branded ‘Wild Wednesday’. ‘On conclusion of this process, if no alternative offers have been received, the UK operations will close,’ the company said in statement this morning.

Customers with gift cards are being urged to spend them as soon as possible with administrators expected to block their use in the coming weeks as the business winds down. But people who have ordered items for Christmas online are now panicking they may never arrive with no chance of a refund.

The historic department store, founded off Bond Street in London in 1778, could now vanish completely after a rescue deal with sports retailer JD Sports collapsed this morning. Arcadia’s concessions, including Topshop and Dorothy Perkins, are worth £75million-a-year in sales to Debenhams – and without them the business is heading for the wall.    

Experts today called the collapse of the two giants one of the most ‘devastating’ weeks in the history of British retail with up to 25,000 workers put at risk of redundancy in the space of 12 hours. The number of job losses is so large it equates to losing the entire labour force of the UK fishing industry overnight.

MailOnline research has found that since the first lockdown in March, 277,815 people in Britain have been put at risk of redundancy – or have lost their jobs – as high streets across the country are decimated by rising online sales, business mismanagement and months of lockdowns caused by the coronavirus crisis. 

As Debenhams stood on the precipice, it also emerged today: 

• JD Sports was the last remaining bidder for Debenhams, which has been in administration since April, with growing doubts that all 124 stores will open tomorrow;
• Debenhams customers have been told their gift cards will be accepted, for now, with people who have already made Christmas orders worrying they may never arrive; 
• Experts predict that Sir Philip Green and his wife Tina are unlikely to be forced to pay more than £50million into the Arcadia pension scheme, which has a £350million shortfall;
• By filing for administration last night, Arcadia was able to avoid new tax-gathering rules brought in by HMRC, BBC claims;

Sir Philip Green was seen sauntering through the streets of Monaco over the weekend, where his superyacht Lionheart is still moored today, as it was revealed 13,000 Arcadia staff were put at risk.  He is planning a Christmas stay at a luxury Maldives resort, according to reports.   

One of Sir Philip’s customer service team today told the BBC he had a message for his boss, and said: ‘I think he should sell his yacht and take money out of his own pocket to help his staff, to make sure people aren’t going to be without money for Christmas.’ 

Pressure is building on Sir Philip Green to bail out Arcadia’s pension scheme, which has an estimated deficit of £350million. But experts have said that Sir Philip is unlikely to be on the hook for it.

The Greens are also expected to receive millions of pounds from the administration of Arcadia as they will be amongst the first in the queue to receive money back when the companies’ shops and brands are sold. However, their equity stake would be wiped out. 

Shadow Business minister Lucy Powell said today: ‘This is devastating news for the 12,000 employees at Debenhams who are facing a very worrying Christmas, and comes on top of the news that Arcadia has gone into administration. The Government must urgently set out how it plans to support the people affected by the collapse of these companies, including pressing Philip Green to do the right thing and plug the Arcadia pension deficit.’ 

Labour MP Stephen Timms, who chairs the Work and Pensions Committee, said: ‘Whatever happens to the group, the Green family must make good the deficit in the Arcadia pension fund.’

The collapse of Debenhams came in a truly devastating week for the British high street, perhaps the worst ever in living memory.

Geoff Rowley, of FRP Advisory, joint administrator to Debenhams, said: ‘All reasonable steps were taken to complete a transaction that would secure the future of Debenhams.

‘However, the economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached.

‘The decision to move forward with a closure programme has been carefully assessed and, while we remain hopeful that alternative proposals for the business may yet be received, we deeply regret that circumstances force us to commence this course of action.

‘We are very grateful for the efforts of the management team and staff who have worked so hard throughout the most difficult of circumstances to keep the business trading.’

JD Sports was the last remaining bidder for Debenhams, which has been in administration since April.

In a brief statement to the London Stock Exchange, the company said: ‘JD Sports Fashion, the leading retailer of sports, fashion and outdoor brands, confirms that discussions with the administrators of Debenhams regarding a potential acquisition of the UK business have now been terminated.’

Experts have said the loss of Arcadia and Debenhams will change Britain’s retail landscape forever. 

Richard Lim, chief executive of Retail Economics said: ‘We cannot overstate the significance of this collapse given the vast property portfolio, number of jobs impacted and the reverberations felt across the industry.

‘In a week that has seen the collapse of the Arcadia Group, this is a truly devastating week for the high street. This puts up to 25,000 jobs at risk in just a couple of days.

‘The reality is that Debenhams has been outmanoeuvred by more nimble competitors, failed to embrace change and was left with a tiring proposition.

‘The impact of the pandemic has accelerated its demise but underlying issues within the business were the root cause.’

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said: ‘The retail house of cards on the high street is in danger of collapse with both Debenhams and Arcadia group now looking increasingly likely to face liquidation.

‘Shares in Frasers Group and Marks and Spencer rose strongly in early trading with expectations they could be the last big department store chains standing in town centres.

‘Frasers Group is also a strong contender to snap up the distressed brands up for sale.

‘Some of those gains though were erased amid concerns about the wider malaise on the high street. A nightmare before Christmas is unfolding for 25 thousand employees who will lose their jobs if buyers are not found for parts of both businesses.

‘Arcadia Group’s collapse has set off a domino effect, with JD Sports pulling out of talks to buy Debenhams.

‘Arcadia is the biggest concession operator in Debenhams and so its collapse into administration clearly put the frighteners on management.

‘The decision has shares in JD Sports up again today, in a relief rally following a sharp decline last week. Next is also on the front foot. It’s already shown resilience through the pandemic with its strong digital offering, and it too could capitalise on the demise of two high-street rivals.’

Monaco resident Sir Philip was seen relaxing in the French principality, where he keeps the super yacht, over the weekend. Speaking to Radio Four Today’s Programme, under the condition of anonymity, the Arcadia worker said: ‘We haven’t really been told what’s happening. All we know is we need to keep working as normal.

‘I have a pension but I’m not sure what’s going to happen to it. I think we may be out of a job’.

Meanwhile, Sir Ian Cheshire, former chairman of Debenhams, and current chairman of Barclays, said he felt ‘desperately sorry’ for those whose jobs were at risk. 

But he told BBC Radio Four he was ‘not surprised’ that news of Arcadia’s collapse could have a knock on impact on Debenhams.

He said: ‘They’ve both dealt with the same problem of ‘how fast can you change?’ particularly when you are stuck with long leases and costs and the internet. They were caught in a straight jacket.

‘The real problem now is that you have got to be so much faster and you have got have so much more online if you are going to survive the online pressures.’

Mayor of London Sadiq Khan said: ‘The news that thousands of Arcadia and Debenhams jobs are at risk is deeply saddening – especially so close to Christmas. 

‘I hope deals are agreed that save as many jobs as possible.

‘Having extracted so much wealth from the Arcadia business, Philip and Tina Green owe a moral debt to its workers, and should have to meet the cost of the pension shortfall, as they were made to following the collapse of BHS.’

It comes as reports suggest the future of Debenhams is hanging in the balance with JD Sports set to pull the plug on a rescue deal amid the collapse of the Arcadia retail group.

The JD Sports group were said to be closing in on a deal to buy the department store chain, which is in administration.

But the collapse of Arcadia has now threatened to derail the rescue of Debenhams, leaving the fate of 25,000 jobs in the balance.

Sir Philip Green’s empire owns Topshop, Wallis and Dorothy Perkins – and Arcadia and its eight brands collapsed into administration last night.

The group, which employs 13,000 people, is the biggest single concession in Debenhams stores and accounts for about £75million in sales.

Arcadia’s collapse could take the department store with it, as it could now be wound down, risking another 12,000 jobs. 

JD Sports, which entered exclusive talks to rescue Debenhams last week, was reconsidering its position as Arcadia’s collapse would dent the department stores’ finances. 

It is understood that sales of Arcadia brands make up around 5 per cent of Debenhams’ total revenues.

Investors flocked to buy JD stock yesterday, pushing its shares up 5.8 per cent, or 43p, to 776.2p, as they believe the takeover of such a distressed chain is risky.

It followed a day of drama which saw Arcadia reject an offer for a £50million rescue loan from Green’s bitter rival Mike Ashley, who runs House of Fraser and Sports Direct. 

Ashley is expected to face off against online giant Boohoo to buy Arcadia’s bombed-out brands, with Topshop likely to garner the highest price tag.

Retail experts yesterday said Green and his wife Tina had failed to invest enough in the likes of Outfit, Burton and Miss Selfridge, or build a successful online business like rivals Zara, H&M and Boohoo.

A row also erupted yesterday over the company’s pension scheme after it emerged that there may be a £350million black hole. 

The shortfall could result in 10,000 pensioners having their payouts cut by a fifth.

In 2017, Green had to put £363million into the pension scheme for BHS workers following calls for him to be stripped of his knighthood for ‘services to the retail industry’.

Former City Minister Lord Myners said Green was ‘an asset stripper’: ‘He doesn’t invest in his business, he milks them.’

Ian Grabiner, Arcadia’s boss, said: ‘In the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe.’

There will be no immediate job losses and stores will still trade. 

Sir Philip, 68, acquired Arcadia for £850million in 2002. Though his chief executive blamed the pandemic for the high street giant’s demise, experts have pointed out that Arcadia has struggled to respond to the increased competition from low-cost rivals like Primark, and online disrupters such as ASOS and Boohoo.

Critics have also accused Sir Philip, who has been mired in a series of controversies in recent years, of not investing enough in the businesses to get them in shape to deal with the new competition in retail.

Arcadia is the latest retailer to have been hammered by store closures during the pandemic, with rivals including Debenhams, Edinburgh Woollen Mill Group and Oasis Warehouse all sliding into insolvency since March.

The group, which runs 444 stores in the UK and 22 overseas, said 9,294 employees are currently on furlough. No redundancies are being announced yet as a result of the appointment and stores will continue to trade. 

Administrators said they will be ‘assessing all options available’, which could see brands sold off in separate rescue deals.

Arcadia will continue to honour all online orders made over the Black Friday weekend and will continue to operate all of its current sales channels, according to a press release.

Retail trade union Usdaw said it will seek an urgent meeting with Arcadia’s administrators in an attempt to save jobs and ensure staff are treated fairly as Sir Philip’s retail empire goes bust.

Business secretary Alok Sharma said he would be keeping a ‘very close eye’ on the administrators’ report on director conduct, and pledged the Government would support the affected workers. 

In a statement, Arcadia chief executive Ian Grabiner said: ‘In the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe.’

He added: ‘This is an incredibly sad day for all of our colleagues as well as our suppliers and our many other stakeholders. Our stores will remain open or reopen when permitted under the Government Covid-19 restrictions, our online platforms will be fully operational and supplies to all of our partners will continue.’

Matt Smith, joint administrator at Deloitte, said: ‘We will now work with the existing management team and broader stakeholders to assess all options available for the future of the group’s businesses.

‘It is our intention to continue to trade all of the brands and we look forward to welcoming customers back into stores when many of them are allowed to reopen. We will be rapidly seeking expressions of interest and expect to identify one or more buyers to ensure the future success of the businesses.’    

Usdaw national officer Dave Gill said: ‘Now that Arcadia is in administration it is crucial that the voice of staff is heard over the future of the business and that is best done through their trade union.

‘We are seeking urgent meetings and need assurances on what efforts are being made to save jobs, the plan for stores to continue trading and the funding of the pension scheme. In the meantime we are providing our members with the support and advice they need at this very difficult time.

‘Over 200,000 retail job losses and 20,000 store closures this year are absolutely devastating and lay bare the scale of the challenge the industry faces. Each one of those job losses is a personal tragedy for the individual worker and store closures are scarring our high streets and communities.

‘What retail needs is a joined up strategy of unions, employers and Government working together to develop a recovery plan. Usdaw has long called for an industrial strategy for retail, as part of our ‘Save our Shops’ campaign, to help a sector that was already struggling before the coronavirus emergency. 

‘Retail is crucial to our town and city centres, it employs around three million people across the UK. The Government must take this seriously; we need a recovery plan to get the industry back on its feet.’ 

Sir Philip’s career has spanned massive highs including a £1.2billion payout in 2005, but has also been marred by a pensions scandal and accusations of sexual harassment. For two decades, the 68-year-old dominated the British retail scene and built a multi-billion-pound fortune through a series of acquisitions.

He was knighted by the Queen, feted by Prime Ministers, and rubbed shoulders with A-listers like supermodel Kate Moss and actor Sylvester Stallone.

Based in Monaco, home of the super-rich, he was regularly photographed by media on his £100million superyacht, Lionheart, and even hired Beyonce to perform at his son’s bar mitzvah party.

Sir Philip bought department store chain BHS for £200million in 2000, then Arcadia for £850million two years later and twice tried to buy Marks & Spencer.

His flagship brand, Topshop, was the go-to destination for teenagers and affordable fashion lovers. In 2009, he took the brand to the US, opening a big New York store.

When he sold a 25 per cent stake in Topshop to US private equity firm Leonard Green & Partners in 2012, that brand alone was valued at £2billion, cementing his oft-cited nickname of ‘king of the high street’.

What followed was a series of business missteps that saw his empire unravel, and also trashed the personal reputation of a businessman whose street-smart public image belied a more genteel start in life.

Sir Philip went to the boarding school Carmel College, but he left at 16 with no formal qualifications and, backed by a loan from his family, threw himself into the rough and tumble of the London rag trade. A bricks-and-mortar retailer, he failed to adapt his fast-fashion brands when competitors emerged.

They were undercut by new players like Inditex’s Zara, H&M and Primark, while their failure to successfully develop online businesses saw them outflanked by e-commerce specialists such as ASOS and Boohoo.  

The hammer blow for Sir Philip’s reputation came in 2015 when he sold BHS to a collection of little-known investors, including former bankrupt Dominic Chappell, for a nominal sum of £1. A year later BHS went out of business, with 11,000 jobs lost and a £571million hole in its pension fund. 

Up until then, politicians, the public and press had often admired Green, even with his extravagant lifestyle. In 2005 when Arcadia paid Sir Philip’s wife Tina, the group’s ultimate owner, a £1.2billion dividend, some people decried the payout while others saw it as the fruits of his success. After BHS’s collapse, however, all bets were off.

MPs branded him the ‘unacceptable face of capitalism’, saying his greed and disregard for corporate governance led to the company’s demise and called for him to be stripped of his knighthood. 

After the pensions regulator pursued him, Sir Philip wrote a cheque for £363million in 2017 to plug the BHS pensions fund hole. But his reputation was further tarnished when he was named in Parliament as having tried to prevent publication of allegations of sexual harassment by him against Arcadia staff. He denies the allegations. 

All the while, trading continued to deteriorate at Arcadia, which owns the Topshop, Topman, Dorothy Perkins, Wallis, Miss Selfridge, Evans, Burton and Outfit brands, and has more than 500 stores. A restructuring last year provided only temporary respite. Covid-19 lockdowns proved the final straw.

The collapse of the group is a bitter blow to Sir Philip, who has long prided himself on his financial acumen.

During an interview with Reuters in 2012 he pulled out a wad of fifty-pound notes from his trouser pocket. ‘I’d rather talk about things I understand,’ he said. ‘This is money.’