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Talking Business: 'Could it be the beginning of the end for BHS?'

Jonathan De Mello is head of retail consultancy at property agency Harper Dennis Hobbs

It is the beginning of the end for BHS – that much is clear since Sir Philip Green, the consummate wheeler dealer that he is, sold the business for £1 to Retail Acquisitions. Sir Philip worked hard to turn the business round, but even with his considerable retail skill-set he was fighting a losing battle.

The brand has lost both its relevance and its core shopper base – offering relatively unfashionable product at mid-market prices, at a time when fast-fashion (fashionable product at value prices) is very much in-vogue.

Over time, Next, H&M, Zara and most of all Primark have stolen BHS’ market share, outdone it in the fashion stakes and undercut it on price. It is difficult to know what BHS actually stands for now. Is it a clothing retailer? Not a good one. Is it a department store? Not really as it offers very little beyond some Arcadia concessions.

Sir Philip’s foray into food – gaining food consent for over 80% of the portfolio – can be seen through now for what it is – a prelude for sale of the leases to discounters such as Aldi and Lidl.

It is clear that radical action is needed in order for Retail Acquisitions to ensure the stipulations of sale set out by Sir Philip – such as commitment to the substantial (circa £100m) pension liability – are met.

There are significant savings to be made from a complete review of BHS’ property assets – not just through sale of the properties the business owns on a freehold basis, but also disposal of unprofitable/expensive stores.

The circa 50 stores ‘under review’ will remove a substantial amount of cost from the business, which can then be re-invested to cover pensions and other debts. The list I have seen does not include the Oxford Street store - though there have apparently been other ‘lists’ circulating with Oxford Street indeed featuring.

It makes sense for it to be included, as on rent review it could potentially triple in rent – so exiting this store would save a significant amount of money (circa £3m).

There would be plenty of interested bidders for the store also – both in terms of retailers and property investors, and I would be very surprised indeed if negotiations for the sale of the lease aren’t already underway.’

With regard to the remainder of the portfolio, I believe it is really only a matter of time before the rest of the business folds.

If Sir Philip could not turn the business round it is very hard to believe that Retail Acquisitions – whoever they actually are – can do so.

Frankly Retail Acquisitions must have known this before they acquired the business, given the very large tranche of prime stores on the review list in key centres such as Manchester, Birmingham, Edinburgh, Leeds and Newcastle – a list that was apparently created only a few days after the acquisition of the business.

Selling off key stores in such a short space of time is not exactly a vote of confidence in the longevity of the wider business.

Sir Philip may have only sold the business for £1, but politically he has avoided significant fallout – in terms of disassociating himself from the ultimate winding down of the BHS business - with the store closures and job losses that will inevitably follow.

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