Warm autumn puts Arcadia out in the cold

Being the man upstairs must be a thankless task. This time last year, retailers were complaining that it was so cold, consumers were refusing to leave their houses, thus their Christmas takings were lower than ever before. This year, Sir Philip Green, boss of Topshop parent company Arcadia, is complaining that it’s been too hot – and no one’s buying winter woollies. Thus, Green says he’s expecting to have to close 250 of his stores as their leases expire, after profits in the year to the end of August fell by 38%. Will retailers ever be happy?

Admittedly, Arcadia’s year hasn’t exactly been peachy: not only did Topshop’s lucrative partnership with uber-model Kate Moss come to an end, but pre-tax profits dropped from £213.2m in 2010 to £133.1m in 2011. Like-for-like sales also fell, by 1.8% over the year – a drop that steepened to 4.4% during the first quarter of this financial year. It didn’t help that Arcadia (wisely or otherwise) chose not to pass the cost of more expensive raw materials on to its customers – which led margins to fall by 1.8%, or £52.4m.

So you can see why Green is blaming the weather, which was about three degrees above average during October and early November – particularly given that woolly jumpers are one of this season’s key pieces. Arcadia isn’t the only one struggling, either: chains like Debenhams, Marks & Spencer and even the painfully trendy Urban Outfitters have all had to discount hats, scarves and coats weeks before they usually would.

Naturally, retailers are only too happy to point to forces outside their control (weather that’s either too warm or too cold, riots, other miscellaneous acts of God) for poor performances – not least because it tends to keep awkward questions from shareholders to a minimum. But looking at separate retail figures, there are almost certainly other factors at work. In the past few days, both JD Sports and Mothercare have published dampened sales figures. Just this morning, Dixons announced losses of £25.3m. So we’d suggest the eurozone debt crisis is, in all likelihood, also knocking confidence in the UK’s retail sector.  

Happily for Arcadia, though, things are going a little more positively abroad. The chain now has 600 franchised outlets in 36 countries, including two flagship Topshop stores in the US – one opened in Chicago in September – and another to follow in Las Vegas in March. Green added that he intends to open stores in China next year, although these ones won’t be franchised. In typically philanthropic style, he pointed out that ‘I want to make the money. I’m not going to build a 500 million or billion dollar business for somebody else.’ That's a sentiment we think multi-billionaire Green will stick to, whatever the weather...