BHS is in administration: Here’s what analysts say was to blame (and what the future holds)
BHS is in administration having notched up £1.3bn in debt, it has been confirmed this afternoon.
Duff & Phelps has been appointed to handle the iconic retailer's administration, with managing directors Phil Duffy and Benjamin Wiles sounding confident about finding a new buyer.
CityAM understands more than 30 enquiries have already been made, and now that the £571m pension liabilities have been transferred, the 88-year-old department store chain is thought to be an attractive proposition.
But what took the business to this stage – and could a new owner really turn its fortunes around? Here's what retail analysts are saying today….
Conlumino figures show the extent of the problem, with BHS' proportion of footfall from clothing shoppers dropping from 13.4 per cent in 2000 to 8.2 per cent last year, and market share of spend almost halving from 2.3 per cent to 1.4 per cent.
Read more: Who has blood on their hands when it comes to BHS?
Neil Saunders, chief executive of Conlumino, said BHS had failed to keep up with changing tastes and rising competition from the likes of Primark and TKMaxx, and even being unable to keep pace with the likes of Debenhams or Marks & Spencer.
"A firm that lacks relevance but has a sound financial footing has a chance of reinvention. A firm that has relevance but lacks a sound financial footing has a chance of attracting investment. Sadly, BHS has neither," he said.
"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."
Phil Dorrell, partner of consultant Retail Remedy agreed. "We might love the BHS brand but when was the last time you shopped in a store? Lose sight of your customer and you lose sight of your business.
"The attention has all been on the debts of the business but the ongoing strategy of BHS has been neglected. There isn't a reason to shop there. The supermarket offers tick all the boxes that BHS once owned and without a radical change in proposition there just isn't a space for BHS to occupy."
Joe Rundle, head of trading at ETX Capital, said BHS' troubles suggested a wider issue at play that could hurt other British retailers.
"Even if a buyer can be found for the chain, there is trouble on the high street as consumer sentiment is nowhere near as strong as it looks. It’s not just BHS that’s suffering – shares are down sector-wide over the last 12 months – reflecting investor caution about an industry that’s increasingly dependent on cheap credit and little else to drive it," he said.
"BHS may have been another Woolworths that struggled to adapt to the new retail world. But the same pressures that squeezed the life out of BHS are being felt across the UK retail sector today."
Julie Palmer, partner and retail expert at Begbies Traynor, agreed, noting that BHS' failure to raise enough proceeds from the sale of leases meant "a key plinth of the group's rescue was knocked out from under them".
“Sadly, as an underperforming brand that simply hasn't kept up with the pace of change in the retail sector and requires major investment, it looks increasingly unlikely that any buyer will be brave enough to salvage the business in anything like its current form," she added.
Industry lobby group, The British Retail Consortium (BRC), said the loss of another well-known high street retailer "should sharpen our focus" to what is going on in retail in the UK, with the rate of change only set to pick up the pace as shopping shifts increasingly online, property leases come up for renewal and the cost of labour rises.
“These effects could mean there are as many as 900,000 fewer jobs in retail by 2025, but those that remain will be more productive and higher earning.
“Our recent work on the future of retail’s workforce has found that store closures on UK high streets and town centres could exacerbate the impact on employment in already fragile communities with weaker regions and the most vulnerable low paid staff most at risk," a spokesperson said.
Property firm Knight Frank has warned that while BHS is more likely to be the exception rather than the rule, there could nevertheless be further retail casualties in the coming months.
Retail casualties this year already include Brantano, the shoe chain which was bought back last month by its previous owner Alteri through a prepack administration, and the tailor Austin Reed, which filed it intention to appoint administrators last week.
"The UK retail market is in the throes of structural change and continued price deflation is effectively keeping the market in a straight jacket – retailers are having to run ever harder just to stand still. Retailing is the survival of the fittest and BHS was left wanting. It won’t be alone," Knight Frank's head of retail research, Stephen Springham.
He added that while there is unlikely to be rampant demand for all of its stores, there will be interest in individual sites from the likes of Sports Direct, H&M, Zara, Superdry, Primark and other budget retailers.