Written by: Julie Palmer
Published: 25th April 2016
Thousands of employees of the historic UK retail business British Home Stores (BHS) have been informed that the company is set to enter administration.
The longstanding fashion and home furnishings operation has been struggling desperately to stay afloat and avoid insolvency in recent months and has ultimately failed to find the emergency funding required to keep it in business.
Administrators are now set to be assigned to manage the organisation’s affairs, with as many as 11,000 employees across dozens of UK stores now facing the prospect of losing their jobs.
BHS’ collapse is being described as the biggest retail company failure seen in the UK since Woolworths went out of business in 2008.
“It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale,” a letter sent by BHS’ owner Dominic Chappell to each member of the company’s workforce explained.
“I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep your heads held high, you all have done a great job, but remember that it was always going to be very, very hard to turn around.”
Having struggled to turn any sort of profit in recent years, BHS was sold last year for a nominal fee of £1 by its former owner Sir Philip Green, best known as the man behind the fashion retailers TopShop and TopMan.
The business was acquired in that deal by a group of American financiers called Retail Acquisitions but it has been unable to steer the business away from serious financial difficulties.
Beset by a variety of operational challenges throughout 2016, the company recently agreed deals to reduce its rent-related overheads with landlords around the country but these arrangements have not been enough to keep the retailer in business.
It was hoped that a £60 million loan would be secured in support of a broad turnaround effort but a deal to that end is now understood to have fallen through and left BHS bosses with with no choice but to enter the business into administration.
Speaking on Radio 5 Live this morning, Julie Palmer - partner and retail analyst at Begbies Traynor and Real Business Rescue – stated that BHS was a 'tired' business and insolvency was inevitable with little chance of revival.
"In very simple terms, lots of other retailers have been doing things better. Next sell homeware better, M&S sell food and clothing better, Primark attacked the discount end of the market better and the high street can be a fast moving place; other entrants have done well, and BHS has just lost pace with the others," Palmer said.
"I think it's difficult to see BHS rescued in anything like its current form. It is a tired brand and has been losing money for some time now. It's difficult to see a white knight coming in and spending money purely to plug a gap in a loss-making chain.
"There was believed to be interest from Sports Direct owner Mike Ashley but the pension fund deficit is £571m; a huge amount for anyone to swallow for a fundamentally troubled business and likely to be off-putting for any investor."
Regional Managing Partner
Julie is a vastly experienced business recovery specialist and advises directors and sole traders during times of financial insecurity. She is highly regarded across the industry and is a member of the Insolvency Practitioners Association and a Fellow of The Association of Business Recovery Professionals.