BHS collapses into administration an inevitable outcome

Mon, 25 Apr 2016 | ADMINISTRATION

The owner of retail chain BHS has written to members of staff to inform them that the distressed business has gone into administration following failed attempts to stay afloat.

BHS, which was acquired only last year for £1 by Dominic Chappell and his Retail Acquisitions consortium, is the largest high street collapse since Woolworths folded in 2008. It follows failed talks with fellow retailer Sports Direct about buying some of its 164 stores in the UK.

Chief among the reasons cited are a large rent bill, which the embattled retailer fought with a company voluntary agreement (CVA), and a massive pensions deficit of £571 million, which was inherited from previous owner Sir Philip Green.

Mr Chappell told BHS’s 11,000 staff: “It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale.”

“I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep you heads held high, you have done a great job and remember that it was always going to be very, very hard to turn around.”

Duff & Phelps have been named as administrators, with finding a buyer for the business the top priority. Staff wages for the rest of April will be paid by the administrators, according to Mr Chappell.

According to Harsha Wickremasinghe, Associate at Livingstone Partners, the BHS business model itself lies at the root of a problem.

"Its relevance to the current market is unclear – in terms of product range, brand appeal and distribution strategy. These structural weaknesses, coupled with soaring rents, high business rates and pension liabilities, alongside the impact of the National Living Wage, gave BHS little room to manoeuvre." says Wickremasinghe.

"BHS has been a ‘problem-child’ of the department store sector for some time and has simply failed to move with the times. Its offer lacked any clarity, the brand mainly traded off of its legacy and it engaged in a series of increasingly desperate measures to prolong its existence – the move into selling food probably being the best example of this. Whilst rivals such as Debenhams, House of Fraser and John Lewis have all invested heavily in developing their ranges, multichannel capabilities and heavily-refurbishing their stores, BHS was left dangerously exposed. Its woes were further compounded by other more focused retailers, such as Primark, chipping away at its soft underbelly – to devastating effect."

"Whilst it is sad to see a retailer of BHS’ scale collapse, particularly when it concerns its employees, few will be sorry to see the brand disappear from the UK’s super-competitive retail landscape."

For more information, see the guide: Buying liquidated assets an attractive option.


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