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Wednesday, 4 April, 2001, 15:46 GMT 16:46 UK
Arcadia's clearance sale

There is a chink of light in the UK's gloomy clothing retail sector.

Arcadia, the company behind Top Shop and Warehouse, announced a move from loss to profit on Thursday.

The UK's second largest clothes retailer is now in talks to sell Warehouse, Principles, Racing Green and Hawkshead to a management buy-out team.

The sale of these brands is the latest stage of Arcadia's battle for survival in the High Street and the company could yet become one of the big turnaround success stories of UK retailing.

Wear and tear

Arcadia owns some of the UK's best-known High Street brands, including Burtons Menswear, Evans and Dorothy Perkins.

Arcadia brands
Burton Menswear
Dorothy Perkins
Topshop
Evans
Principles
Racing Green
Hawkshead
Miss Selfridge
Wallis
Warehouse
Outfit
But some of Arcadia's brands are showing some wear and tear.

These sales will allow Arcadia to concentrate on core chains such as Dorothy Perkins, Evans and Top Shop, which contribute more than half of womenswear sales.

Success story?

Like Marks and Spencer, Arcadia has been hit by the rise in discount retailing and increased competition on the High Street.

Unlike Marks and Spencer, its turnaround strategy does appear to be showing some signs of success, as evidenced by Thursday's move into profit.

The emergence of discounters prompted Arcadia to cut its prices, a move which plunged the company into loss last year.

The high cost of buying Sears womenswear also took its toll on the company's share price.

In July 1999, Arcadia bought Sears' women's clothing business for 151m ($235m), including the Warehouse, Wallis, Miss Selfridge, Richards and Outfit brands.

For most of last year, its share price struggled to rise above about 40 pence. Now it is close to 2, but still far off its high of 5.08 a share in 1998.


Now it has cut its costs in line with its new lower prices, allowing it to move back into profit.

Last year, it closed a quarter of its shops, cutting some 3,500 jobs.

This enabled the group to reap huge savings in the rent it paid.

It scrapped Richards and Principles for Men completely and made sure it had more than one of its brands in many of its stores.

Arcadia's long-serving boss John Hoerner was forced to step down in November last year.

It got a new boss, Stuart Rose, poached from supermarket chain Iceland.

Whither Arcadia?

Baugur, Iceland's biggest retailer has been building a stake in the company amid some speculation that it might bid for Arcadia.

But at present, Baugur is thought more likely to to pressure the group to expand overseas.

One option that has been mooted for the future of the company is a management buy out.

It has only existed in its current incarnation for two years.

Rich history

Since the Burton Group demerged from Debenhams in 1998, the group became known as Arcadia.

The Burtons group was founded in 1900 by a Lithuanian immigrant.

When Montague Burton realised he couldn't afford to go to university, he borrowed 100 from a relative and set up a menswear shop in Chesterfield.

By the mid 1940s, there was hardly a high street in the country without a Burton shop.

About one fifth of the British male population of the time bought a suit from Burtons.

In 1946, the company made its first move into womenswear.

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See also:

18 Jan 01 | Business
Arcadia sees sales up
13 Nov 00 | Business
Top Shop owner poaches Iceland chief
19 Oct 00 | Business
Arcadia plunges into loss
13 Apr 00 | Business
Arcadia ditches jobs and shops
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