(Bloomberg Opinion) -- Philip Green’s Arcadia Group on Wednesday gained the backing of landlords for a series of Company Voluntary Arrangements. This has saved – at least for the time being – the tycoon’s retail interests from collapse.

It’s a rare piece of good news for Green, who at one point was hailed as “King of the High Street” and rubbed shoulders with the likes of supermodel Kate Moss at his birthday parties. Now his shops are under pressure and he’s battling allegations of sexual harassment, which which he has strongly denied. 

With more than 500 locations, Arcadia could not overcome the current bout of retail malaise in Britain. It was the last big group to hold out from doing a controversial CVA to close underperforming stores and cut rents on many others. But as trading conditions worsened, it eventually succumbed.

Although a challenge to the restructuring is still possible, for now, it seems that Green’s retail empire has survived.

With the final sizeable contender for a CVA in the current cycle now out of the way, property companies may be tempted to think the worst is over. It is not.

For a start, Arcadia’s landlords, including Hammerson Plc, British Land Co., and Land Securities Group Plc, will have to endure rent cuts or revised lease terms on close to 200 Arcadia locations. That’s one of the reasons why Intu Properties Plc, the biggest, had voted against the restructuring.

And, as I have argued, a CVA is not a panacea. It deals with only one aspect of a business: its property portfolio. It does not make a brand any more relevant to its customers, nor ensure it has the right products at a price that people are prepared to pay.

In the case of Arcadia, there is another issue. The Green family must invest to bring its flagship chain, Topshop, into the modern age by improving its online offering so it can compete with internet rivals such as Asos Plc and Boohoo Group Plc.

It must also update its tired-looking stores, as new outlets from rivals such as Associated British Foods Plc’s Primark and Hennes & Mauritz AG are looking increasingly slick. Finally, Arcadia must revive its other brands, such as Dorothy Perkins and Miss Selfridge.

Christina Green, wife of Philip and Arcadia’s technical owner, has pledged 100 million pounds ($127 million) over recent months to overhaul the business. But that might not be enough. Asos will invest 200 million pounds in its current financial year alone.

Arcadia is likely to continue to find life tough, even after the CVA. It could close more stores as leases expire. Unless it delivers a sustained recovery in sales and profit it could well need to seek another restructuring.

Andy Hughes, analyst at UBS, said recently there was nothing to stop companies that had secured a CVA coming back for a “second bite.” That is already happening with Select, the fashion chain that has secured the backing for a second procedure a year after its first one.

And if Green can’t revive Arcadia, there could be even worse ahead than another restructuring: administration.

According to Jonathan de Mello, head of retail consultancy at Harper Dennis Hobbs, about 80 percent of companies that have gone through CVAs over the past three to four years have ultimately ended up in administration. These include BHS, which Green sold for 1 pound in 2015 and which collapsed a year later.

But were Green to steer Arcadia back to health – and given the scale of the underinvestment, that’s a tall order – landlords still have the rest of the sector to worry about.

House of Fraser is making heavy losses for new owner Sports Direct International Plc, and there’s a risk that Mike Ashley abandons the cause of reviving the department store. That would mean more vacancies in high streets and shopping malls, in addition to those left by Debenhams’ partial retreat.

Even stronger chains, such as Marks & Spencer Group Plc, are shedding locations. Others, such as Next Plc, are seeking cheaper rents from landlords as leases expire. With most property groups agreeing to Green’s demands, other retailers could well push for lower payments. That’s why Intu refused to support Arcadia’s proposal. Indeed, there’s a growing movement against CVAs, with Sports Direct also challenging Debenhams’ closure plans.

But there are nevertheless whole swathes of the high street, such as drugstores and bookmakers, where large cuts in store real estate haven’t even begun.

Property companies are not completely powerless in the face of all these vacancies, as some can be relet. But Susan Munden, analyst at Bloomberg Intelligence, says much depends on location. Vibrant retailing areas have a good chance of attracting new tenants, and rents could possibly increase. That is particularly the case if landlords have time to prepare for the closure. But poorer high streets and malls will continue to suffer. 

The worst may have been avoided at Arcadia. But that doesn’t mean it’s time to call the bottom of the retail property crisis.

To contact the author of this story: Andrea Felsted at afelsted@bloomberg.net

To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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