Thousands of jobs at risk as Asos strikes Arcadia deal

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Topshop storeImage source, PA Media
Image caption,
The deal does not include the brands' stores

Thousands of jobs remain at risk after online fashion retailer Asos struck a £295m deal to buy four brands from failed retail group Arcadia.

Asos is buying the Topshop, Topman, Miss Selfridge and HIIT brands, but not the shops.

Sir Philip Green's Arcadia group fell into administration in November last year, casting doubt over the future of its brands and 13,000 jobs.

Asos is paying £265m for the brands and a further £30m for the stock.

About 300 people currently employed by the brands in design, buying and retail partnerships will transfer to Asos, but a question mark hangs over thousands more jobs.

About 70 stores with 2,500 employees are expected to close.

Within the past few weeks 50 stores have already closed, with the loss of about 2,000 jobs.

One Topshop worker who wanted to remain anonymous said he had found out about the Asos deal from a Tweet by the fashion retailer on Monday.

"I woke up this morning, and just went on my phone, and it was the first thing that I saw on Twitter," he said. "That was the first word we had, we didn't hear anything properly from the Arcadia side of things for a good hour and a bit afterwards."

He said that it was a part-time job for him while studying and "I feel worse for the people who work there full-time for their careers."

"There's lots of people who've been there for many years, and obviously, when [Asos] is just taking the digital side of it, there's so many people that work in the stores. It's really sad for company."

He said that while coronavirus "hasn't helped" the closure of physical stores would "leave a big gap".

"People still want to shop in person. It is good doing online shopping, but what then replaces the High Street? There's going to be nothing left, eventually, if all these companies keep buying up [brands]."

Asos chief executive Nick Beighton said: "The acquisition of these iconic British brands is a hugely exciting moment for Asos and our customers and will help accelerate our multi-brand platform strategy.

"We have been central to driving their recent growth online and, under our ownership, we will develop them further, using our design, marketing, technology and logistics expertise, and working closely with key strategic retail partners in the UK and around the world."

Mr Beighton told journalists on a conference call that acquiring the brands would accelerate Asos's mission to become "the number one destination for fashion-loving 20-somethings throughout the world".

"This deal makes perfect sense for us on every level," he added.

In a separate BBC interview, he said: "There was a lot of competition and we're really pleased we eventually came through and won the brands.

"We think we're the natural owners for these brands. We know these customers and we know this market. We have the best designers in London and really I think these brands sit naturally on the Asos platform."

Investment plans

Administrators Deliotte said the deal was expected to complete on 4 February.

However, neither Asos nor the administrators made any mention of the people who worked in the brands' store networks.

Image source, Getty Images

Asos said it had acquired "strong consumer-facing brands" and saw "a significant opportunity" to drive further growth for them globally.

It added that the brands would benefit from "investment into customer engagement and brand positioning in line with our existing model".

Asos has seen strong sales in the pandemic and is already one of the biggest wholesalers for the brands that it has acquired.

Asos' purchase of the four main Arcadia brands leaves the thousands of staff employed in the Topshop, Topman, Miss Selfridge and HIIT shops facing a desperately uncertain future. They are unlikely to keep their jobs. It is hard to see a buyer emerging at the right time to keep them employed.

There are also 10,000 members of the Arcadia pension scheme who face a possible hit to their retirement benefits. The scheme has an estimated deficit of £350m and is being assessed by the Pension Protection Fund, the government-backed lifeboat scheme for orphan pension plans.

Council leaders all over the country will also be fretting at the rapid exodus from the High Street. Topshop once had 300 shops - only 70-odd are still operating - and Debenhams' 124 High Street stores are expected to close from next month. This is a double blow to town centres, which will now look much emptier when pandemic trading restrictions are lifted.

Landlords will be wondering who might be their new tenants. As one retail observer has noted, there is only so much street food and crazy golf that a single postcode can take. Many councils will hope a conversion of empty premises into flats will make the difference. However, the British Property Federation is warning that new government plans to fast-track the re-purposing of retail premises risk making matters worse.

Another of Sir Philip Green's brands, Evans, was bought by Australia's City Chic in December for £23m.

Other brands in the Arcadia stable that have not yet been sold are Dorothy Perkins, Wallis and Burton.

It emerged last week that online fashion retailer Boohoo was in "exclusive" talks to snap up those brands.

Also last week, Boohoo sealed a deal to buy the Debenhams brand and website for £55m. However, the price tag did not include any of the retailer's remaining 118 High Street stores or its workforce, resulting in up to 12,000 job losses.

On Monday retailer Aldi said that workers affected by the collapse of Arcadia and Debenhams should apply for one of the 4,000 jobs it aims to create in the UK this year.

Supermarkets have seen high demand for groceries since March 2020 as restaurants and pubs have been hit by lockdowns and coronavirus restrictions.

Aldi is currently opening one store per week "as we continue to try to meet the huge demand", said Aldi UK recruitment director Kelly Stokes.

"That means finding around 4,000 new Aldi colleagues this year and, if we can do that while also helping those who have recently lost out due to closures elsewhere, we will do," she said.

Sir Philip Green is under pressure to use his own money to plug an estimated £350m hole in Arcadia's pension fund, which has about 10,000 members.

Last year, the retail tycoon had an estimated fortune of £930m, according to the Sunday Times Rich List.

Prof John Colley, associate dean of Warwick Business School, described the Asos deal as "another nail in the High Street's coffin",

"Meanwhile. landlords will have to try to re-let the properties and there will be few takers in the current climate," he said.

"With retail values collapsing, it is likely that many of these properties have to be converted for other uses. In that sense, we can see Covid-19 accelerating and crystallising trends which have been developing for many years."