Sir Philip hits out at the banks

Oct 22 2008 by Iain Laing, The Journal

RETAIL tycoon Sir Philip Green hit out at the banks as he announced a fall in sales at his retail group Arcadia, which owns Top Shop and Miss Selfridge.

He said that UK banks made “grave errors” such as being too keen to give out loans, that had contributed to the credit crisis.

But he played down the severity of the economic downturn, saying it was not yet as severe as in the early 1990s, when interest rates were in double-digits, and said that retailers were “all going to have to work harder” to weather the storm.

To ease matters, he said the Government and banking authorities should help to ensure that the banks were not too quick to repossess people’s homes.

“There has got to be a very close look at what we do with mortgage arrears, what do we do with home owners. There has got to be a workout period,” he said.

Sir Philip has been in talks over a possible deal to buy around £1bn of Baugur’s debts, giving him huge sway over its UK stores such as House of Fraser and Hamleys. But he said it was unlikely Arcadia would buy them in the near future.

“It is probably a little bit too early... there are political issues... it is quite complex,” he said. “We may do [a deal]. We are ready to do this if we think it is still the right business for us.”

During the year, Arcadia saw like-for-like sales – which strip out the impact of new stores – fall 2.8% from 2007, indicating the slowdown in consumer spending. Sir Philip said fashion brands Topshop, Topman and Miss Selfridge had produced record turnover and profit in an “excellent” year, although the group’s more mainstream outlets such as Bhs, saw tougher trading and were dragged down by poor weather.

Total sales were down 0.6% at £1.85bn, with like-for-like sales 2.8% lower. The billionaire spent £85m – mainly on new space and internet sales platforms – last year.

Pre-tax profit in the year to August 30 fell from £199.2m to £188.9m on sales that fell 0.6% to £1.8bn. Like-for-like sales fell 2.8%.

Despite worsening economic conditions, Arcadia also plans to add a further 210,000 square feet of UK selling space in the year ahead, and boost the number of its international outlets to more than 500.

Sir Philip has, meanwhile, kept a tight rein on costs and also looked to reduce the group’s borrowings, reducing debt by £76m to £695m during last year. He said sales growth had been strongest at men’s clothing retailer Top Man.