Arcadia Group considering sale of BHS department store chain after 'several approaches'

Out-Law News | 29 Jan 2015 | 11:26 am | 1 min. read

Arcadia, the UK fashion retail group, is considering selling its BHS department store chain after receiving "several approaches" for the loss-making brand, according to press reports.

BHS made a loss of £21 million in cash terms over the financial year ending 30 August 2014, up from a £19.3m recorded loss the previous year, according to Arcadia's 2014 accounts.

Arcadia chair Sir Philip Green said at the time that the performance of BHS had been "challenging ... with this sector of retail continuing to be very tough". Retail expert Tom Leman of Pinsent Masons, the law firm behind Out-Law.com, said that some of the brand's difficulties stemmed from its failure to adjust its business model to growing consumer demand for an "omni-channel" retail experience.

"Retailers such as John Lewis that have worked hard on their omni-channel offering are now reaping the benefits," he said. "In a saturated market, with increased competition on the high street from low-cost brands like Primark, consumers are less brand loyal while at the same time seeing physical stores as an extension of their online experience. The more successful chains will increasingly become those that act as a showcase to enable online shoppers to view products before purchase, or to function as click-and-collect locations."

"Although its owners have disposed of a number of sites in recent years, BHS continues to maintain a sizeable number of large stores in unattractive locations which are not suited to changes on the high street and the way that people now shop," he said.

Any potential buyer would also have to address the chain's pension deficit, estimated at about £100m in the latest set of accounts, he said.

BHS was founded in 1928 and was purchased by Green for £200m in 2000. It was integrated into the wider Arcadia Group in 2009. It primarily sells clothing and household items, although it began selling food at three trial locations last year. According to the latest accounts, these food stores have "traded favourably in the early stages". BHS has 180 stores and employs almost 12,000 staff, according to the BBC.

A spokesperson from Arcadia confirmed that there had been "several approaches on BHS over the past few months". "It is now the company's plan to explore whether any of these can be brought to a conclusion," the company said.

Leman said that one possible option for the future of the brand could be to sell it on to one of the private equity firms with a proven track record of turning around struggling business models. A pre-packaged administration could allow the viable parts of the business to be saved and protect jobs, he said.

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