BHS in crisis talks with landlords as West Midlands stores under threat
MAJOR retailer BHS has been forced into a CVA as it battles to get affordable rents at its stores across the country.
The high street group, which has 14 of its 164 stores in the region, needs its creditors to agree to its plans to enter company voluntary arrangement (CVA) proposals for BHS Ltd and BHS Properties Ltd.
It has threatened landlords of 40 stores – including three in the West Midlands – they will close unless they agree to receive 25% of the rent due in the next 10 months and negotiate rent reductions.
“Where rent reductions are achieved, these stores will remain open,” said Will Wright, restructuring partner at KPMG and proposed supervisor of the CVA. “It is hoped that the store closure number will be kept to a minimum.”
It is asking landlords of 47 other stores nationally to agree to rent cuts of up to 50% as it looks to find a way to be profitable.
The retailer was bought last March by Retail Acquisitions from entrepreneur Sir Philip Green and in the year to August 2015 lost £85m.
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The CVA is an acknowledgement that the turnaround plan can only be achieved by transforming the cost base of the business through tackling its “onerous lease arrangements”.
BHS faces tough competition from its traditional rivals John Lewis and Debenhams while other competitors, including supermarkets and online retailers, now offer cheaper clothing and home products.
Mr Wright 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.”
The CVA strategy intends for all of its stores to continue trading, at least until the end of 2016.
77 of its “most viable” stores will continue to pay full rent, although it will move to a monthly, rather than quarterly, billing cycle for three years. These stores include Burton on Trent, Dudley, Nuneaton, Solihull, Sutton Coldfield, Telford, Walsall and Wolverhampton.
Around 30% of its stores “have been deemed viable if a reduction in rent is obtained”. The CVA would see 21 stores pay 75% of the monthly rent and a further 26 pay 50%. The West Midlands stores are at Redditch, Coventry and Stoke.
The remaining 40 stores, including Birmingham New Street, Birmingham Union Street and Stratford upon Avon, would pay 25% of the rent due for at least 10 months while negotiations take place.
Mr Wright added: “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.”
The company needs to secure at least 75% creditor approval for these CVAs with the vote taking place on March 23.
