BHS folds as no buyer found
High street retail giant BHS is set to be liquidated after administrators failed to find an acceptable buyer for the business, putting all of its 164 stores and 11,000 jobs at risk.
In the biggest retail collapse since Woolworths in 2008, administrators Duff & Phelps put out a statement today confirming what many company employees, BHS customers and retail experts had feared.
Philip Duffy, managing director of Duff & Phelps, said: “The British high street is changing and in these turbulent times for retailers, BHS has fallen as another victim of the seismic shifts we are seeing. The tireless work and goodwill of the existing management team and employees of BHS with the support of my team were not enough to change the fortunes of the company.”
“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”, said the administrators in a statement. “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 company was sold last year for £1 by retail tycoon Sir Philip Green to the Retail Acquisitions group headed by former racing Dominic Chappell, and in April filed for administration.
There were a number of last-minute offers for the company. A bid from Sports Direct founder Mike did not match the administrators’ expectations, and funds from a Portuguese-backed consortium did not appear.
However, with working capital of £100m needed from day one of any potential buyer’s operations, the offers melted away and forced the administrators to take action.
Hilco Capital’s retail services team has been appointed by Duff & Phelps to assist in the operation of BHS’s stores, potentially extending their viable trading period to allow the administrators the opportunity to realise maximum returns for creditors.
All about the money
Commenting on the development Nick Hood, retail and insolvency expert at Opus Restructuring said: “The administrator will have... decided that by putting the company into liquidation, closing the stores, selling the stock, selling off the assets, that produces the best results. That's his job. You wish he could look at the employment situation, the eleven and a half thousand jobs, he couldn't take that into consideration. At the end of the day this is all about the money.”
Reacting to the announcement business minister Anna Soubry stated that it was “devastating news for all those who work at BHS and those in the supply chain.
“The government stands ready to support workers to find new jobs as quickly as possible”, continued Soubry. “The business secretary has already announced an accelerated Insolvency Service investigation into the activity of former BHS directors. Any issues of misconduct will be taken extremely seriously.”
The chairman of the Work and Pensions Committee. Frank Field, called on Green to help fill the gap in the BHS pension scheme: “Sir Philip could dramatically change this position, both by how he regards the workforce, but also making sure that pensioners, which is after all people who've deferred wages, which he's been a steward, a trustee of, to ensure that they don't actually lose out on money that they've foregone in saving schemes for their retirement.”
A spokesman for Green said he was “saddened and disappointed” by the news, as he had hoped that the business “would be sold as a going concern.”
Founded in 1928, BHS was once seen as a stalwart of the British high street, but the company has seen its market share reduce dramatically over the past 15 years. Since 2000, BHS has seen its share of the UK clothing market drop by around 40%, and the company has run at a loss for the past seven years.
Its decline has been blamed on a variety of factors, including changing consumer tastes, competition from supermarkets, online and more agile budget retailers, unsustainable rents on their high street stores and huge debt and pension burdens.
BHS has previously admitted that it cannot support its £571m pension deficit, which includes the cost to an insurer of buying it out.