Green deals cut Arcadia debt levels by £200m

Philip Green, the retail entrepreneur, is set to refinance Arcadia's flagship site at Oxford Circus in London in a move that will enable him to clear the first tranche of debt on the £850m deal to acquire the company, just three months after it was completed.

Mr Green plans to raise about £140m from remortgaging the 214 Oxford Street site later this month. The property currently houses Top Shop and Top Man stores as well as the Nike Town outlet and a branch of Miss Selfridge.

He said: "We are paying £12.5m rent a year. The cost of the mortgage will be £7.5m. That seems like good business."

Mr Green revealed yesterday that he has already paid down £200m of the first £350m tranche of bank debt owed to HBOS, which backed the Arcadia takeover. About £38m came from the sale of Rubicon, which included the Hawkshead, Racing Green, Principles and Warehouse chains. A further £50m has come from mortgaging other properties with the rest coming from strong cash flow over the Christmas period.

The comments came as Mr Green announced solid trading performances at the Arcadia chains and at Bhs, which he acquired nearly three years ago. He said profits would improve at both businesses this year and expressed confidence about the outlook for consumer spending. "I'm not as pessimistic as everyone else," he said.

In the seven weeks to 11 January like-for-like sales at Arcadia were up by 2.4 per cent on last year. Top Shop and Top Man were the best performers with underlying sales up 10.5 per cent and 13.5 per cent respectively. Underlying sales fell slightly at Burton Menswear and Wallis.

"I'm very pleased with where we've landed with Arcadia this Christmas," Mr Green said. "Considering how trade was and the warm and wet weather in November we have cleared our stocks." He pointed out that the gross margin was up 0.8 percentage points.

At Bhs like-for-like sales were up 1.3 per cent with the gross margin up 0.4 percentage points. He indicated that the business had not chased sales but managed its cash flow and stocks tightly. It is thought Bhs will this year beat the £100m operating profit it recorded last year.

On Bhs's trading he said: "It was a tough textile season. The weather was poor the whole way through and it was more difficult in the middle market. If it's not cold, people don't buy a coat."

Mr Green said his buying spree may not be over though he does not intend to participate in the bid battle for Safeway. "We've got funds available. If something takes our fancy we'll buy it."

On the outlook, he said: "Although only 19 weeks into the current financial year, customer and sales response to new ranges, together with our leading brands, gives us confidence that we will deliver significant profit enhancement this year."

Mr Green bought Bhs in April 2000 for £200m. He acquired Arcadia in October for £850m.