Sir Philip Green, the tycoon behind the Topshop to Bhs retail empire, vowed his group would be debt-free in two years' time as he unveiled a "solid" 6.4 per cent rise in its profits yesterday.
The billionaire is also considering closing a large number of stores as he shakes up the property portfolio at Taveta Investments, the holding company for the seven Arcadia brands and Bhs.
Topshop and Topman both delivered "record turnover and profit" and were again the engine of growth in the year to 28 August at Taveta, which saw pre-tax profits rise 6.4 per cent to £213m.
Sir Philip said the group's debt peaked in 2005 after he paid his Monaco-based wife a £1.2bn dividend, but he has reduced debt each year since then. The Green family has not paid itself a dividend, including for 2009/10, for five years.
Following the merger between Bhs and Arcadia in 2009, Taveta Investments slashed bank debt for the combined businesses by £146m to £464m in the year to end of August. Total sales came in at £2.78bn.
Sir Philip, who carried out a review of government spending said: "If you look at our eight-year performance, which has been pretty consistent, we will be debt-free by the end of 2012."
Total UK like-for-like sales rose by 1.3 per cent. The Arcadia retailers – Topshop, Topman, Burton, Wallis, Evans, Dorothy Perkins and Miss Selfridge – grew sales by 1.5 per cent for the year to 28 August, with Bhs being up by a more modest 0.9 per cent.
As well as the "record" performance at Topshop and Topman, Sir Philip said: "Wallis has performed well, and Dorothy Perkins and Miss Selfridge have been steady. Bhs has been better than last year." But he said that it had been "slightly tougher" at Burton, the menswear chain, and Evans, the plus-size brand. "Menswear generally gets tougher when the climate is tough and everyone now sells bigger sizes," he said.
Across all its brands, the group's underlying sales are up by 1 per cent since the end of August, although Sir Philip said he "remains cautious" about the year ahead in the wake of price hikes on raw materials, such as cotton, VAT going up to 20 per cent on 4 January and "some wage inflation".
Taveta Investments generated an impressive jump in cash on its balance sheet, up by £42.8m to £386m by the year end. The group plans to reshape its property portfolio by closing smaller stores and housing more brands under one roof, as leases come up for expiry over the next three years. The group has 2,542 company-owned and 579 franchised outlets in 37 countries.
Sir Philip has already created 215 concession departments within Bhs, primarily focused on Wallis and Dorothy Perkins. He said: "We have got 500 leases that expire over the next 32 months." While Taveta will continue to trade a number of the shops coming up for renewal, Sir Philip said: "There is a chance to close down some of the stores."
He added that he would continue to expand the reach of Topshop and Topman globally. Topshop, which opened in New York in April 2009, has signed for a shop in Chicago and Sir Philip said he was looking at other sites, possibly in Los Angeles and Miami. The group will also open five stores in Brazil, including one in Rio, and is close to signing sites in Australia and South Africa.