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Tesco and Arcadia Deepen Concession Partnership

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Tesco

With the toughest downturn in British corporate history still fresh in Tesco’s mind, the supermarket chain wants to keep its recent recovery gains going and plans to expand its existing agreement with Arcadia to do so.

It’s been a little more than a year since Tesco inked a deal with Sir Philip Green’s Arcadia Group to bring some of the behemoth’s brands—including Dorothy Perkins, Burtons and Evans—into five of its biggest stores to supplement its own F&F fashion label. The Guardian reports that Tesco told investors Wednesday that it plans to add Arcadia shop-in-shops to four more stores before the end of the year, which will bring the total number of concessions to 26.

Looking ahead, the company intends to open as many as 35 concessions a year going forward, though it did not specify if they would all be Arcadia brands.

Last year, Tesco reported a record 6.4 billion pound (nearly $9 billion) pre-tax loss and axed thousands of jobs. But as per the company’s first-half results released in October, like-for-like sales rose 0.6% in the U.K. in the six months ended Aug. 27—its third consecutive quarter of growth.

Bruno Monteyne, an analyst at Bernstein Research, told the Guardian that Tesco said the 26 concessions would generate nearly 4 million pounds ($4.9 million) in rental income a year for the retailer. Thus, 35 more a year over the next five years could potentially bring in 40 million pounds ($49.3 million) annually.

This tie-up also presents a new revenue stream for Arcadia, which lost dozens of similar shop-in-shops when BHS was forced to close its brick-and-mortar stores this past summer.

Tesco also has deals in place with Claire’s Accessories, Sock Shop, Pavers, Sports Direct and Mothercare.

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