British department stores group, British Home Stores (BHS), has gone into administration, putting 11,000 jobs at risk after failing to agree to a last-minute deal to rescue the department store chain.
Administration would endanger nearly 8000 jobs at the company and another 3000 contractors working with the 88-year-old firm, which has 164 stores. The retail chain has been hit hard by intense competition in the retail sector.
A fixture on Britain’s high streets, the firm has suffered from a chronic lack of investment recently. It has debts of more than STG1.3 billion pounds (A$2.44 billion), including a pension fund deficit of STG571 million pounds.
The chain’s 164 stores are threatened with closure in the biggest retail failure since Woolworths Group plc collapsed in 2008.
Retail magnate, Philip Green, bought the chain for STG200 million pounds in 2000, but sold it in 2015 for just a pound after failing to turn it around.
Administrators Duff & Phelps said in a statement on Monday that the group will “continue to trade as usual” while a deal is sought.
In March, the group had won support from its creditors for a rescue plan to try to allow the retailer to stay in business thanks to big cuts in its rent bill. The chain was bought in March 2015 by buyout firm Retail Acquisitions, a collection of little known investors.
“BHS’ failure brings to a close a long run period of decline, which has seen the chain fall out of favour with British shoppers thanks to its failure to respond to changing tastes and the intensification of competition on the high street,” said Conlumino CEO, Neil Saunders.
Sauders said 15 years ago in 2000, BHS attracted some 13.4 per cent of all clothing shoppers through its doors. Although not all of these visitors would use BHS as their main store, many would buy one or two products – helping BHS attain a respectable 2.3 per cent share of the clothing market.
“Last year BHS pulled in just 8.2 per cent of all clothing shoppers with a 1.4 per cent share of the clothing market,” he said. “Such a decline reflects the fact that even to its core, older audience BHS has become something of an irrelevance. The chain’s ratings on price, quality, value, and range have all fallen thanks to the rise of more compelling alternatives.”
According to Saunders, Primark and the grocers have dominated attention for more basic product, while chains like TKMaxx have allowed more aspirational shoppers a chance to buy fashionable branded product at low price points.
“Even in the middle part of the market, the reinvention of ranges at Debenhams and M&S – while not perfect – have left BHS’s range looking increasingly dated and dreary,” he said. “All of this has been exacerbated by a store estate that, outside of flagship shops, looks tired and dull. This has meant that despite being in high footfall locations, stores have increasingly failed to draw people in.”
Saunders said against this backdrop the business has become uneconomic and unprofitable, something exacerbated by the high levels of debt, including those from pension liabilities. A firm that lacks relevance but has a sound financial footing has a chance of reinvention. A firm that has relevance but lacks a sound financial footing has a chance of attracting investment. “Sadly, BHS has neither,” Saunders said.
“It is a firm that is out of step with modern consumer tastes, which lacks the finances to enact the major changes required. As such, it is now a retailer that is out of time.”
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