BHS is to put into motion a groupwide turnaround plan that includes the proposed use of a Company Voluntary Arrangement, and could see up to 60 stores, or more, close.
The department store Group believes resetting costs is essential in order to achieve a successful turnaround of a business that has been loss making for many years. The CVA of BHS Ltd & BHS Properties Ltd which together accounts for 164 stores, would enable BHS to address its legacy issue of over-market rents in a significant number of its stores causing those stores, and the Group as a whole, to be underperforming financially.
Although it has sought to reduce property costs through exits and rent renegotiations, this property led CVA is still needed to address a number of lease agreements in which the Group is contracted to pay in excess of market rates.
BHS is also in active discussions to address the pension deficit.
The Group also intends to reset its cost base. This includes a head office re-structure and a consolidation of management levels in stores.
CEO Darren Topps described the proposal as “a necessary milestone in resetting British Home Stores to ensure its long term future as an iconic British retail brand.”
“Some of our stores are loss making as we are being charged rents that are too high relative to today’s market. The CVA will address this issue.
Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan that we have identified, and gives British Home Stores a secure financial footing from which to grow and deliver sustainable profitability.
BHS will continue to trade as usual and we thank our staff and customers for their continued support.”
Store improvements begun under the original turnaround plan will continue, with restaurants and cafes renewed; a convenience food offering rolled out to most stores; new external signage, windows and in-store visual merchandising, and a fresh & enhanced product range will be introduced. BHS’s digital offering would be upscaled too, with the launch of a new, more functional online offering that provides a better customer experience.
A successful CVA will reset the Group’s property portfolio by aligning rents to the market level and exiting loss-making stores where necessary. Additionally, there will be a head office re-structure and a consolidation of management levels in stores. It is understood landlords have been told around 50-60 shops without substantial reductions in rent will be closed, and more are at risk.
In a statement, BHS said the business needs to use its space more effectively and through recent trials it has demonstrated that it can drive sales and margin through remixing its product categories. As part of this, a brand refresh programme has also been initiated which will see the Group refocus on, better defined, in-house brands as well as improving its digital offering.