Arcadia in landlord talks as 100 stores see leases ending, 210 already shut
today Jan 21, 2019
Topshop owner Arcadia could reportedly close 100 locations in its vast stores empire as leases on the shops come to an end by late 2020. That would follow more than 200 closures that have happened since 2016.
The leases, many of which were signed back in the 1990s before anyone knew the high street devastation online shopping would leave in its wake, cover all of the company’s chains. That means Topshop/Topman, Miss Selffridge, Dorothy Perkins, Wallis, Burton and Evans.
It’s the latest store closure news after several years in which the fashion retail industry’s closures have accelerated and comes at the same time as a new report predicts that 175,000 UK retail jobs could be lost this year.
And Arcadia, which is controlled by Sir Philip Green, isn’t the only major fashion name in talks with landlords at the moment. New Look, Debenhams and House of Fraser are just some of the prominent UK retailers looking to exit onerous leases.
Terms of 25 years with five-year rent reviews have been fairly standard in the UK, although news emerged last week that M&S signed a lease in 1971 that is set to run until the year 2254. The 283-year lease is for a store in Stockton which has been empty since it was closed last summer.
When Arcadia’s presumably-25-year leases were signed, there was no inkling of just how much of a fall in visitor traffic high streets, shopping centres and department stores would see in this century.
The fall has come as rents, and business rates, have continue to rise, despite the lower profitability of many store locations making a worryingly large number of them unviable.
The locations being looked at by Arcadia have leases that expire in 2019 or 2020. But that doesn't have to mean all of the shops would close. An Arcadia property spokesman told The Mail on Sunday that there is a “significant” opportunity to review leases as contracts end, which could mean the company will also be looking for major rent reductions at some sites, with the threat of exiting the location held in reserve as its biggest bargaining tool.
In its most recent set of accounts, the company paid £183 million in annual lease payments on its UK stores and it's estimated that its business rates bill for 2018 would have been around £128 million.
UNDER THE RADAR CLOSURES
While the potential closure of 100 shops over a short period of time is understandably headline grabbing news, the fact is that the company has been quietly closing shops since 2016.
It’s reported to have closed as many as 210 shops/concessions, around a fifth of its total store/concession count in that period. And the business has also reportedly been working with advisors on a restructuring plan in recent months, which could see the eventual plan calling for other closures aside from the 100 leases that are soon to be up for renewal.
It's all about location with not all of the leases to be renewed likely to be for underperforming stores and not all of those not yet ready for renewal likely to be strongly performing stores.
The Sunday Telegraph analysed Arcadia’s closure figures and said that Dorothy Perkins has suffered the most closures with 62 stores shutting since 2016. Evans had 41 closures, and there have been 26 at Wallis. The remaining 80 closures were shared between Burton, Topshop, Topman and Miss Selfridge.
Those closures seem to have largely gone under the radar and John Webber, head of business rates at real estate specialist Colliers International, told the newspaper: "We have all witnessed the high profile closures and restructuring of retail businesses leading to stores shutting and large scale job losses. But what is happening quietly, without the fanfare but with the same devastating results, is the steady stream of shops that close at lease renewal or at break clauses where the keys are handed back to landlords.”
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