BHS to Vanish From U.K. Shopping Streets as No Buyer Found

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Pedestrians walk past an advertisement in the window on BHS Ltd. store on Oxford Street in London.

Photographer: Simon Dawson/Bloomberg
  • As many as 11,000 jobs may be lost as retail chain founders
  • All stores will be in ‘close-down sale mode’ over coming weeks

BHS will be liquidated, consigning the 88-year-old British retail chain to history and leading to as many as 11,000 job losses after efforts to find a buyer failed.

None of the multiple potential purchasers were able to save the business due to the scale of the working capital requirement, administrator Duff & Phelps said in a statement Thursday. The firm had told bidders they would need to pay 100 million pounds ($144 million) upfront to keep BHS’s 163 stores open, a spokeswoman for the retailer said.

The collapse of BHS has sparked public outrage and a parliamentary inquiry to establish how the retailer’s pension liabilities were allowed to swell to 571 million pounds. Billionaire Philip Green pocketed 420 million pounds in dividends before selling BHS last year for one pound to Dominic Chappell, the former race-car driver with no retail industry experience who failed to turn the chain around. The liquidation will increase the scrutiny around Green’s scheduled appearance at a parliamentary hearing on June 15.

Duff & Phelps said all BHS stores will be “in close-down sale mode” over the coming weeks. The jobs of 8,000 employees are likely to be lost, while a further 3,000 positions held by non-BHS workers may also be at risk, the administrator said.

Comparison of retail industry job losses
Comparison of retail industry job losses
Bloomberg

Restructuring firm Hilco Capital has been appointed to assist Duff & Phelps in winding down the business, a person familiar with the matter said.

Austin Reed

BHS becomes the second British retail stalwart to disappear in quick succession after this week’s announcement that 116-year-old formalwear chain Austin Reed will also be liquidated. It’s the biggest U.K. retail collapse since Woolworths Group Plc in 2008.

The failure of the two businesses is a “significant blow for British bricks and mortar retail,” Jon Copestake, chief retail analyst at the Economist Intelligence Unit, said by e-mail. “The failure of a retail brand like BHS has been something that any visitor to its half empty stores in recent years might have made an educated guess at.”

The retailer, which opened its first store in London almost nine decades ago, has struggled to grow sales against a backdrop of mounting competition and dwindling numbers of visitors to the central shopping districts of British towns and cities.

BHS’s outlets offer everything from clothing and lighting to luggage, which have become readily available from online retailers, discounters and supermarkets.

The collapse demonstrates the need for retailers to keep investing, because “if there isn’t a particular reason to visit your stores, people won’t," according to Charles Allen, an analyst at Bloomberg Intelligence. Marks & Spencer Group Plc and fast-fashion chain Primark are both likely to benefit from BHS’s demise, he said.

The chain’s stores are likely to attract buyers given their “fundamentally good central locations,” said Jonathan De Mello, head of retail at property consultancy Harper Dennis Hobbs. Discounters such as Aldi, Lidl and TK Maxx will probably be interested, he said.

BHS owes about 1.3 billion pounds to more than 1,200 creditors, according to a court document published in March. Among the first creditors in line for payouts are London-based investment group Grovepoint Capital LLP, which loaned BHS 65 million pounds in September, and Green’s Arcadia Group, which is owed about 40 million pounds.

Among those last in line are dozens of landlords, suppliers and delivery companies. Duff & Phelps is required to produce a report to creditors within the next few weeks, featuring an estimate of the funds they have found which are available for distribution.

The fate of the money owed to the 20,000 members of BHS’s pension program remains undetermined. The U.K.’s pensions regulator is investigating whether Green deliberately avoided obligations to the program when he sold BHS last year.

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