BHS threaten to cut hundreds of jobs in battle over rent costs

Department store chain BHS will close a high number of its stores across the UK if landlords do not reduce the cost of rent.

The retailer, which was sold for £1 by Top Shop boss Sir Philip Green to a small group of investors last year, has threatened to close 40 of its 164 stores which will lead to the loss of hundreds of job.

BHS has filed company voluntary arrangement (CVA) proposals to the High Court in an attempt to decrease the cost of rent for its high street stores.

KPMG is advising BHS on its CVA, which can only be gained with the approval of 75% of its landlords.

BHS has divided the 164 stores into three categories in the CVA; 77 stores are to remain unaffected; 47 stores are deemed viable if a reduction in rent is obtained; and 40 that need a substantial reduction in rent to survive.

Will Wright, restructuring partner at KPMG and proposed ‘supervisor’ of the CVA, said: “For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing.

“BHS’ CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.

“While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment. The company needs to secure at least 75% creditor approval for these CVAs.”

Brian Green, restructuring partner at KPMG and second proposed supervisor of the CVAs, added: “BHS currently has a total of 164 retail sites across the UK. Importantly, none of these stores will close on day one, and suppliers will continue to be paid on time and in full. The landlords of a total of 77 of the most viable stores will be retained at current rents which will be paid monthly as opposed to quarterly for three years. A further 47 stores have been identified as being viable at a reduced equivalent monthly rent of either 75% or 50%.

“The remaining 40 stores will continue to trade for a period of a minimum of 10 months whilst negotiations with landlords are undertaken to reduce the rents substantially. Where rent reductions are achieved, these stores will remain open. It is hoped that the store closure number will be kept to a minimum.”

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