UK Retail: Arcadia Suffers 40% Slide In Profit, May Close 260 Stores

Sir Philip Green said his retail empire has seen a near 40% slide in profits as chains including Top Shop and Miss Selfridge chose not to pass on increasing costs to cash-strapped customers.

Arcadia Group, which also includes BHS, Burton and Evans, reported underlying pre-tax profits of £133.1 million compared with £213.1 million last year, as like-for-like sales including VAT fell 1.8%.

Sir Philip said the company, which has 2,507 stores across its brands, saw margins squeezed by 1.8% as it took a £53 million hit to absorb price increases.

Elsewhere, the company reported a bottom-line loss of £120 million after writing down the value of "certain onerous leases" across the estate due to the challenging economic conditions.

The retail sector has been feeling the pinch as household budgets are squeezed by rising prices, sluggish wage growth and battered confidence.

Arcadia said young fashion brands - such as Top Shop, Top Man and Miss Selfridge - were trading positively but the wider group saw a 4.4% decline in like-for-like sales in the first 12 weeks of the new financial year.

But Sir Philip, whose family ranks 13th on the 2011 Sunday Times UK rich list with an estimated fortune of £4.2 billion, said the unseasonal weather in October and November was partly behind the weaker trade.

The retail magnate, who is based in Monaco, did not pay himself a dividend for the year, despite the group turning in sales of £2.7 billion.

He told the BBC on Thursday that up to 260 stores could close in the coming years because of the drop in profits.