Oct. 21 (Bloomberg) -- Arcadia Group Ltd., the U.K. fashion store company owned by billionaire Philip Green, said sales fell in the last seven weeks as a slowdown in U.K. consumer spending affected business at chains such as Dorothy Perkins and Evans.

Revenue dropped 1.8 percent in the period since Aug. 30 after being almost unchanged at 1.8 billion pounds ($3.1 billion) in the year to that date, the London-based company said today in a statement. Operating profit last year declined 6.1 percent.

Arcadia's so-called mainstream chains had a ``challenging time'' as unseasonable weather also affected purchases, Green said. Still, the Topshop, Topman and Miss Selfridge young fashion stores had an ``excellent year,'' he said. Higher food and energy bills have reduced U.K. disposable incomes, contributing to a 2.8 percent fall in sales at Arcadia outlets open at least a year.

``It's hard work,'' Green, 56, said in a telephone interview today, adding that business is ``tough'' for mass- market retailers. ``There's going to be some fallout, there will be some consolidation'' in the retailing industry, he said. The businessman won't take a dividend for a third straight year.

Green this month began talks with Baugur Group Hf, the Icelandic owner of U.K. stores including Hamleys and Karen Millen, aimed at buying its debt. The billionaire said today he's ``still interested'' in Baugur, though there was ``no news.'' He declined to give a timeframe for potential developments.

Falling Sales

Green may pay as much as 2 billion pounds for Baugur's debt, the Financial Times reported this month. The businessman said at the time he would try to prevent rival retail outlets from collapsing in the run up to Christmas. Baugur controls U.K. clothing chains Oasis, Warehouse and Coast, and is part of an Icelandic group that owns House of Fraser department stores.

Arcadia had operating profit of 275.3 million pounds on a measure that excludes goodwill amortization and includes other finance income, down from 293.3 million pounds a year earlier. Green on Oct. 7 reported a 28 percent fall in annual profit at his department store chain, Bhs Group Ltd.

Arcadia's publicly-quoted rivals have reported falling sales as consumer sentiment remains near a record low. Marks & Spencer Group Plc, the largest U.K. clothing retailer, said same-store revenue fell 6.1 percent in the three months to Sept. 27.

``Everybody would have to agree that credit has been very easy at every level,'' Green said, referring to the reasons for the global financial crisis. Resolving the problem ``is not just about cutting interest rates,'' he said. ``This is about people getting help, getting education.''

Arcadia plans to open 210,000 square feet (19,510 square meters) of floor space in the U.K. this year and will increase the number of overseas stores operated with franchise partners to 505 from 447, according to the statement.

Monaco-based Green and his family own about 90 percent of Arcadia, which they bought in 2002 for 850 million pounds.

Net income rose to 164.1 million pounds in the year from 118.2 million pounds in the prior period, as Arcadia's tax bill fell to 24.8 million pounds from 80.9 million pounds.

To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net.

Last Updated: October 21, 2008 08:08 EDT