Arcadia’s deep discounts signal bleak outlook for company, says GlobalData

Following today’s news (Friday 6 September) on Arcadia’s fiscal year (FY) 2017/18 operating loss:

Chloe Collins, Senior Retail Analyst at GlobalData, a leading data and analytics company, offers her view on the chains current challenges:

“Arcadia’s FY2017/18 slump to an operating loss of £154.9m (versus profits of £77.9m last year) will be partly driven by increased levels of discounting, as sales continued to struggle (down 4.5%) due to decreased desirability of ranges and a lack of relevance in a competitive market.

“During FY2018/19, the promotions have ramped up further, with even Arcadia’s previous star player Topshop offering 25% off all items on two separate occasions last week. This will devalue the company’s offer and make it even more challenging to convince shoppers to purchase at full price, driving even greater losses in the future. Arcadia must be more cautious about its discounting strategy and focus on protecting profits which will be needed to fund a successful turnaround of the business.

“Losses will also be due to investment in its new distribution centre in Daventry, which should lead to profit gains in the long run as it aids Arcadia’s digital transformation and its expansion online via third parties Next, ASOS and Very.co.uk, but unless it improves the appeal of the product this will not be an effective investment.”

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