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Warning of job losses as Sir Philip Green's Arcadia puts squeeze on suppliers

Sir Philip Green. Credit: PA Wire

Sir Philip Green’s Arcadia Group has told its clothing suppliers that the company is reducing the price it is willing to pay for the orders it has placed.

ITV News has seen a letter signed by Arcadia’s chief executive, Ian Grabiner, informing suppliers that the company is imposing a 2% discount “from February 1st 2018 on all existing and future orders”.

Grabiner blames “huge changes in the retail market” and explains that Arcadia is facing increased costs as the company adapts its business to accommodate more shopping online.

The move will save Arcadia money but at the expense of its suppliers. In 2016 Arcadia’s cost of sales was £1.7 billion, 2% discount on this is £35 million.

I know this is not news that you would wish to hear but we have absorbed significant costs in technology, distribution and people as I have earlier in order to remain competitive in the global market and we trust you will continue to support us.

– Ian Grabiner, Arcadia Group Chief Executive

Arcadia owns a series of high street brands including Top Shop, Dorothy Perkins, Burton, Wallis and Ms Selfridge. The group is owned by Sir Philip Green and used to include BHS which was sold in March 2015, a year before it went bust.

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It is unusual but not unprecedented for retailers to seek to change commercial agreements with their suppliers. It tends to happen following poor trading performance.

Several big retailers - including Debenhams, House of Fraser and Mothercare - saw sales fall over the Christmas period. Arcadia no longer publishes its Christmas trading figures but High Street observers believe the group didn’t fare well.

Arcadia owns a series of high street brands including Top Shop. Credit: PA Wire

Arcadia has previously demanded a discount of 2% from suppliers in August 2015. At the time the Forum of Private Business (FPB), a non-profit group which represents roughly 18,000 small businesses in the UK, criticised the move.

The chief executive of the FPB, Ian Cass, told ITV News: “This is Arcadia up to its old tricks...The retail market is tough enough as it is without this. A 2% discount could be quite a significant hit. It wouldn’t surprise me if this move pushed some suppliers over”.

I have also spoken to one of Arcadia’s suppliers. The owner of the business is, perhaps predictably, furious although he wouldn’t say how much the discount will cost him.

“Philip Green has done this before” he told me.

“He’s not negotiating, he’s just dictating terms, I feel like he’s stealing my money. I don’t have to accept this sort of behaviour anymore.

"Since BHS went Arcadia’s orders aren’t as big as they used to be. There are plenty of other retailers out there, it’s getting to the stage where I don’t want to supply him anymore”.

In a statement, a spokesman for Arcadia said: “This is a normal commercial request to our suppliers and reflects the very significant investments that we are making in the business”.