THE GRINCH WHO STOLE CHRISTMAS

This on nxt board.. from mitzis...implications if correct for others in sector.

Green faces sales crisis in Arcadia
High borrowings and falling turnover mean Top Shop and Dorothy Perkins chain could 'go bust'
By Jason Nissé
22 December 2002


City analysts are warning that Arcadia, the Top Shop to Dorothy Perkins fashion group bought by Philip Green, could run into financial difficulties after suffering a sharp fall in sales.

Confidential market share figures, produced by research group Taylor Nelson Sofres, indicate that Arcadia has suffered a sharp reversal in sales since it was bought earlier this year by Mr Green for £850m.

Taylor Nelson's Fashion Trak survey is said to be the most authoritative information in the market.

It is sold for thousands of pounds to retailers keen to work out what is happening to their competitors.

The Independent on Sunday has obtained a leak from the study. It makes uncomfortable reading for Mr Green, who has been feted as entrepreneur of the year for his success in turning around the ailing Bhs.

Fashion Trak, studying the six months to 17 November, says that Arcadia's share of the clothes retailing market has fallen in cash terms from 9.4 to 8.6 per cent, indicating total sales are down 9 per cent.

More detailed analysis shows the problem is largely within Dorothy Perkins, the mid-market womenswear retailer. It has seen sales by value fall by 23 per cent in the last year.

John Baillie, retail analyst at SG Securities, said that the figures will most worry bankers at HBOS, which has lent Mr Green nearly £800m to finance the Arcadia purchase. "With its high operational gearing and that level of debt, Arcadia could go bust," he warned. "The data may give Philip Green and his bankers some indigestion over their Christmas turkey."

And the bad news does not stop there for Mr Green. Fashion Trak also reveals that in clothing, his older business Bhs is suffering too. Its total market share has slipped from 3.5 to 3.2 per cent. Mr Green paid a £175m dividend from Bhs in May, 94 per cent of which went to him, and has claimed that he turned down a £800m offer for the business, which he bought for just £200m.

The falling market shares at Mr Green's businesses come against the background of slowing growth for clothing retailers. Fashion Trak indicates that sales overall are growing by just 3 per cent, compared to 5 per cent a year ago.

Despite this, some of the larger players in the market are performing strongly. Marks & Spencer has seen its share rise from 10 per cent to 10.7 per cent while Next is up slightly at 4.6 per cent. One of the strongest performers is Asda, which now has 2.5 per cent of the market, up from 1.7 per cent.

Mr Green would not return calls asking him to comment, but he is better known for cutting costs rather than increasing market share. Since he took over Arcadia he has told suppliers he wants an extra 1.5 per cent discount on existing contracts. He recently appointed Ian Grabiner from GUS to take over the running of the Arcadia chains.


market share is all very well if you have the pricing power yet with all these discounts, sales and offers bottom line appears to be retreating.

Short nxt 734. Should I add?

Regards.
Sha.