Revenues are flatlining at Sir Philip Green’s Arcadia retail empire, which includes Topshop, BHS and Miss Selfridge, even as an absence of write-offs and impairments helped move the shops into the black this year.

“Very challenging conditions both in the UK and around the world” dented sales slightly at family-owned Arcadia, according to Sir Philip, who reported £2.69 billion in group sales in the year to August 25th, down £3.5 billion from the year before.

However, margins rose on the back of better stock management and less discounting, pushing up underlying operating profits by more than 20 per cent to £208 million in the period.

The economic challenges do not appear set to let up, said the company, with underlying year-on-year sales up less than a percentage point in September, October and early November – a number that includes VAT, which rose from 17.5 per cent to 20 per cent in the UK.

The company did not break out the prospects of each brand or region, but British retailers are preparing for a tough Christmas period following a sharp drop in high-street spending in the UK in October.

Sir Philip nonetheless pointed to strong cash generation, and said he would continue investing in the business, with a particular focus on expansion in the US and of the international online business, where sales rose by more than a fifth last year.

Of the 15 new stores Arcadia opened in the year, two were in the US, while 14 concessions started in the department store Nordstrom. A Los Angeles store is planned for spring.

Pre-tax profits, including non-cash write-offs related to stores whose leases expire before 2014 and which Sir Philip has warned he might shut, came in at £104 million – compared with a £120 million loss last year, thanks to more than £200 million of those exceptional charges. – Copyright The Financial Times Limited 2012