London Briefing/Fiona Walsh: When retail entrepreneur Philip Green failed in his audacious attempt to take over Marks & Spencer in 2004, he promised he would take his revenge.
The billionaire businessman - now Sir Philip after being knighted in the queen's birthday honours earlier this year - vowed to use his high-street muscle to derail the M&S recovery.
If he could not buy middle-England's favourite stores group, then his Bhs chain would steal M&S customers instead. Bhs would "trade its socks off", he thundered.
But last week, Sir Philip shocked the retail sector with news of a profits collapse at Bhs over the past year. Underlying sales were down by 7.1 per cent and profits crumbled from £107 million (€159 million) to £42 million.
The normally ebullient businessman, credited with making the fastest billion in British corporate history after he bought Bhs in 2000, was forced to admit the wounds were self-inflicted. He had taken his eye off the ball and allowed a new buying team too much freedom with the clothing ranges. "You name it, we got it wrong," he said last week. "We had the wrong fashions, wrong shapes, wrong sizes."
Not surprisingly, the buyers are now history and Sir Philip himself is back in charge and working 16 hours a day to put things right. The rare admission of failure from one of the most powerful men in the retail industry is all the more galling given the resurgence of M&S under new chief executive Stuart Rose. A former friend of Sir Philip, he was parachuted into M&S two years ago to fight the £9 billion bid.
After a shaky start to the Rose regime, M&S is at last getting its product ranges right in the all-important women's clothing market. Profits have climbed back to £750 million and M&S is winning plaudits all round from the fashion press. New autumn ranges, as modelled by Twiggy, are selling out as soon as they reach the rails and the shares recently hit 648p compared with the 400p bid terms.
Sir Philip has vowed to get Bhs back on track and says spending of as much as £100 million will be required to bring the under-invested retail chain up to scratch over the coming year. Better quality and more fashionable ranges are already showing through in improved sales, although it will be a long haul before profits recover to £100 million - if ever. Some analysts believe the best Bhs can hope for, as it fights fierce competition from the likes of Primark, Peacocks, Tesco and Asda, is for profits to bump along at £30million - £40 million a year.
Sir Philip's brash approach to business is not to everyone's taste in the City and some of his detractors were asking last week whether the man with the Midas touch might finally have lost his magic. But it would be foolish to write off any retailer after one poor year, particularly Sir Philip.
And he should have a happier tale to tell later this month when he presents results for the other part of his empire, Arcadia.
Taking in Top Shop, Burton, Miss Selfridge, Dorothy Perkins, Wallis and Evans, Arcadia is by far the largest part of Sir Philip's privately-owned retail empire. In 2004/5, it earned profits of £250 million and, while it may struggle to match that figure when it reports in a few weeks' time, it will have fared far better than Bhs.
Arcadia is facing the same competitive pressures as the rest of the sector, but the best-performing part of the business is likely to have been Top Shop. With its rapid turnover of reasonably-priced, catwalk-inspired fashion, the chain has become one of the hottest names in the fashion industry in recent years.
Sir Philip is taking Topshop to the US next year, opening a flagship store in Manhattan, and has just pulled off a coup by persuading supermodel Kate Moss to design her own fashion range for the chain. Given her trend-setting style and celebrity profile, the range is guaranteed massive publicity - and huge sales - when it launches next year.
But it is in the US that the supermodel could really help Sir Philip achieve his ambition to turn Topshop into a truly global fashion brand. Over the decades, many British retailers have tried and failed to break into the notoriously difficult American market - including Marks & Spencer, which quit the US fashion scene five years ago after suffering heavy losses at its upmarket Brooks Brothers business.
If Moss's endorsement of the Topshop brand brings in the punters in Manhattan, then she will be worth every penny of the rumoured £1 million a year she is being paid by the Arcadia boss.
For Sir Philip, making it in the Big Apple would far outweigh any disappointment with the dismal performance of his Bhs chain. And it would certainly give him one up on Marks & Spencer.
• Fiona Walsh writes for the Guardian newspaper in London
