Sir Philip Green is in talks with a US investor to sell a 25% stake of Topshop and Topman. Retail Week finds out what this might mean for the UK giant and its billionare owner.
Sir Philip Green’s Topshop and Topman brands have been met with open arms in the US. The UK-fashion powerhouse has just three stand-alone stores in the US plus a series of concessions following a tie-up with Nordstrom, as well as its online business, and yet the brand has already gained huge traction among shoppers, with its products chiming with mid market fashion lovers in the US.
It is unsurprising then that the jewel in the crown of Sir Philip’s empire has attracted serious interest from US investors.
LG&P is an investor in popular US brand J Crew, which is run by former Gap boss Mickey Drexler - a close friend of Sir Philip Green. Sharing of best practice, then, seems likely between the two fashion supremos. Each can provide advice on how to crack their own markets.
Verdict analyst Kate Ormrod said the shared experience will be invaluable for Topshop and Topman.
She said: “America takes quite a long time to crack, partly because it’s so big and there is a lot of competition out there.”
But she added: “There is obvious room for more flagship stores in the US.”
Sir Philip is expected to use the money from the sale to reinvest in the international expansion of Topshop and Topman.
Conlumino analyst Matt Piner said: “Sir Philip sees growth very much online and internationally.
“In the UK Sir Philip has taken the brand as far as it will go, building Arcadia, Topshop and Topman into huge businesses,” said Piner. “And with new players entering the market and price pressures hitting margins and profitability, it makes sense to take the brands to global markets.”
In a clear demonstration of Topshop’s power within Arcadia, the brand’s flagship Oxford Street store is expected to generate sales of £165m this year compared with £65m when he took over 10 years ago. Sir Philip revealed the group delivered a 25% surge in pre-tax profits to £166.9m for the 52 weeks to August 25.
Still holding the majority share in Topshop and Topman, Sir Philip - who has always worked carefully to build the Topshop brand, such as the astute partnership with supermodel Kate Moss - will retain a huge amount of control in how the businesses are run.
Ormrod says: “He’s been at the front of all the recent deals and is the face of the business. He’ll be wanting to make sure the investment and the stake sold is the right thing for the brand.”
Piner adds: “It’s about building a global brand now and the US plays into that. With that brand awareness in the US it will mean entering other continents with prestige.”
Just last month Sir Philip told Retail Week there are more big deals to come. Could further stake sales be in the offing for his other brands Dorothy Perkins, Burtons, Evans, Miss Selfridge, BHS, Wallis and Outfit? Or could the Topshop and Topman deal even be the first step in a break up of the Arcadia empire?
Piner says: “It could go that way but if so, that will be some way off. It’s interesting that Topshop and Topman have been ringfenced, although it’s logical because they are the most valuable brands.”
It seems observers agree the deal is the right one at the right time, when the brands are securely at the top of their game. With the investment - and hopefully the right guidance - Topshop and Topman will surely take the US by storm.