BHS confirms administration as retailer 'loses relevance'

BHS collapsed into administration today (Monday 25 April), putting around 11,000 jobs at risk.

Insolvency firm Duff & Phelps is handling the administration after weekend negotiations by Retail Acquisitions, the consortium which owned the 164-store clothing and homeware retail chain, failed to result in sought-after funding or a company sale.

Reports suggest that BHS's multimillion pound pension deficit was a key factor in a trade sale not being secured, and today's news will add to the uncertainty for staff who have been paying into company pension schemes. The pension deficit, which is part of an overall debt of around £1.3 billion, was inherited when Retail Acquisitions bought BHS from the Philip Green family-led Arcadia Group, for £1, one year ago.

Neil Saunders, CEO of retail research analyst organisation Conlumino, said that BHS has lost relevance over the last decade, falling behind value retailers such as Primark and TK Maxx, as well as the mid-market players such as Debenhams and Marks & Spencer (M&S). A limited digital presence may well have curtailed any attempts to attract new, younger shoppers to engage with the brand and enter its stores.

"Today's failure of BHS brings to a close a long period of decline which has seen the chain fall out of favour with British shoppers thanks to its failure to respond to changing tastes and the intensification of competition on the high street," he commented.

"In 2000, BHS attracted some 13.4% of all clothing shoppers through its doors. Although not all of these visitors would use BHS as their main store, many would buy one or two products – helping BHS attain a respectable 2.3% share of the clothing market. Last year BHS pulled in just 8.2% of all clothing shoppers with a 1.4% share of the clothing market."

Retailers such as the aforementioned Debenhams and M&S, which are themselves facing stronger market competition in the fashion space and have been prompted to reconsider their strategies in an increasingly digital world, are evidently making moves to evolve their respective propositions in order to meet modern consumer demands. BHS, it seems, did not do enough in this area.

"A firm that lacks relevance but has a sound financial footing has a chance of reinvention," noted Saunders.

"A firm that has relevance but lacks a sound financial footing has a chance of attracting investment. Sadly, BHS has neither. It is a firm that is out of step with modern consumer tastes, which lacks the finances to enact the major changes required. As such, it is now a retailer that is out of time."

The analyst also labelled stores outside of its flagship shops, "tired and dull", which he argued was a reason for declining footfall despite their position in prominent locations across the UK. While many retailers have been quick to update their property estates with new systems and customer-facing technology, BHS has seemingly lacked widespread investment in this field.

Jason Shorrock, EMEA vice president for retail industry strategy at tech business JDA, said that there could be further casualties on the high street if retailers do not adapt their operations to meet the needs of today's consumers. He suggested that a combination of fragile economic conditions and "the disruptive force of online retailing" will continue to have an impact.

He commented: "The questions facing retailers are tough: as online continues to cannibalise store sales, how do they deal with a decline in store profitability due to fixed occupancy costs?

"How do retailers address the additional costs associated with an online business without killing their profit margins?"

Shorrock added: "As BHS falling into administration shows, retailers cannot afford to stand still; being able to fulfil customer demand in an intelligent and profitable way is now an imperative.

"Indeed perhaps the toughest question retailers need to ask themselves is: are we changing fast enough to survive?"

Duff & Phelps said today that it is looking to sell BHS and confirmed that the business will continue to trade while a buyer is found. It also indicated that all online orders will be processed as usual.

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