11,000 jobs under threat as BHS appoints administrators

BHS Group faces insolvency as it struggled to grow sales in the face of competition from online retailers and supermarkets.
BHS Group faces insolvency as it struggled to grow sales in the face of competition from online retailers and supermarkets. PHOTO: REUTERS

LONDON • BHS Group appointed administrators to protect against insolvency, putting 11,000 jobs at risk in what would be the biggest retail collapse in the United Kingdom since Woolworths Group in 2008.

Advisory firm Duff & Phelps was appointed after failed negotiations to find a buyer, according to an e-mailed statement. The move also reflects a lack of success in selling property to ease financial strains on the company.

BHS said a lower-than-expected cash balance means it is "very unlikely" to meet all contractual payments.

The retailer, which opened its first store in London almost nine decades ago, has struggled to grow sales against a backdrop of mounting competition.

The chain's 164 outlets offer everything from clothing and lighting to luggage, which have become readily available from online retailers, discounters and supermarkets.

"BHS has long been seen as an anachronism on the high street and it is surprising that it has survived this long," Mr Jon Copestake, an analyst at Economist Intelligence Unit, said by e-mail. "Visitors to BHS outlets, even in prime locations on key shopping dates, will have been struck by how quiet they have been. The chain simply stopped being relevant to shoppers."

BHS said it will continue to trade as usual while administrators seek to sell the business.

The move echoes the 2008 failure of the British Woolworths chain, which foundered almost a century after it hit the scene at the cost of about 27,000 jobs. Since then, retailers including electronics chain Comet and Blockbuster video stores have also disappeared from UK towns.

BHS looked to have been given a lifeline last month when its creditors agreed to accept lower rental payments to prevent mass closures. Retail Acquisitions, the investor group that bought BHS from billionaire Philip Green for a pound last year, hasn't been able to raise the £160 million (S$312 million) it had targeted to revive the chain's fortunes, said the BBC.

When Mr Green bought BHS in 2000, 13.4 per cent of British clothing shoppers visited the chain. Last year, that had fallen to 8.2 per cent, according to researcher Conlumino.

According to a court document, BHS' difficulties have been compounded by a pension deficit of £571 million as of March 4. That figure represents the pension-related liabilities that would be faced by a prospective buyer.

If the retailer is liquidated, it will owe another £757 million to landlords, suppliers and other unsecured creditors, the court document shows. The company also owes £124 million to secured creditors.

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A version of this article appeared in the print edition of The Straits Times on April 26, 2016, with the headline '11,000 jobs under threat as BHS appoints administrators'. Print Edition | Subscribe