Monday, April 25, 2016

News: BHS enters administration

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The Rotherham store of national retailer, BHS is under the threat of closure after a wider turnaround plan failed to prevent administration.

BHS Group Ltd was acquired by Retail Acquisitions Ltd in March 2015 from the Acardia group. The department store operates some 164 outlets in the UK and was acquired by Sir Philip Green's Arcadia in May 2000.

In the same month it denied that a list of 52 stores were those being considered for disposal. The list included BHS stores at Parkgate Shopping in Rotherham and at Meadowhall in Sheffield.

Working with restructuring professionals at KPMG, the owners announced details in March of a proposed company voluntary arrangement (CVA) which divided BHS's 164 store portfolio into three main categories, based on the commercial viability and strategic importance of each site.

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A CVA was agreed but administrators have been appointed today, threatening 11,000 jobs.

Stores at Parkgate and Meadowhall were deemed amongst 40 locations where negotiations with landlords were undertaken to reduce the rents "substantially." Considered unviable, a reduced equivalent monthly rent of 25% was proposed to be paid for a minimum of ten months.

With administrators Duff & Phelps now appointed, a statement read: "The group has been undergoing restructuring and, as has been widely reported, the shareholders have been in negotiations to find a buyer for the business. These negotiations have been unsuccessful. In addition property sales have not materialised as expected in both number and value. Consequently, as a result of a lower than expected cash balance, the group is very unlikely to meet all contractual payments.

"The directors therefore have no alternative but to put the group into administration to protect it for all creditors. The group will continue to trade as usual whilst the administrators seek to sell it as a going concern. Further announcements will be made as appropriate in due course."

David Gill, national officer at the shopworkers trade union Usdaw said on Friday: "We are very concerned about speculation in the media that BHS is on the verge of going into administration. We are seeking urgent clarification from the company and urging them to change their attitude to trade unions and begin a dialogue with us at this difficult and worrying time for staff. We also urge the company to comply with the law, consult staff and Usdaw as the union for BHS workers on the future of the business. I am writing to members working in BHS to reassure them that we will provide the support, advice and representation they require."

BHS has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing. It also has a reported pension defect of £571m.

The Rotherham branch of B&Q is set to close in June as part of plans to counteract a slowdown in the DIY market, which sees owners, Kingfisher plc, close around 15% surplus space (65 stores) by the end of the 2016/17 financial year.

BHS website

Images: Parkgate Shopping

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