Thousands of jobs at risk as BHS threatens to close half its stores

Landlords will be asked to consider reducing rents that are ‘too high for today’s market’

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The Independent Online

More than 2,000 jobs could be at risk under proposals that could see BHS axe up to a quarter of its stores across the UK.

The beleaguered retailer is proposing putting its 164 stores into a Company Voluntary Arrangement (CVA) in order to slash its rents and exit loss-making sites, less than a year after the chain was sold for a token £1 by the retail veteran Sir Philip Green.

Darren Topp, the chief executive of BHS said: “The CVA proposal is a necessary milestone in resetting BHS to ensure its long-term future. Some of our stores are loss-making as we are being charged rents that are too high relative to today’s market. The CVA will address this issue.”

A CVA – a form of insolvency – will need the backing of 75 per cent of BHS’s creditors at a vote on 23 March to proceed. The company said just 77 of its stores would be unaffected by the move. 

Forty stores across the country are at risk of closure if the group and its landlords cannot agree to “substantially” reduce rents there over the next 10 months. “It is hoped that the store closure number will be kept to a minimum,” BHS said.

A further 47 stores have been identified as being viable if rents can be cut by 25 per cent to 50 per cent. The property agent Savills has been hired to help with the latest review and KPMG is set to supervise the CVA.

BHS chief executive Darren Topp said the CVA was an essential move to ensure its long-term future 

Based on an average number of 50 employees per store, if 40 were to close, 2,000 jobs could be axed. However, the figure could also be higher if some of the 47 stores also under review closed. The company has some 8,500 direct employees and 1,500 contract staff. BHS also revealed it is planning to restructure its head office and cut management in stores. 

The moves follow 12 months of efforts to improve the fortunes of the loss-making retailer. Its sale by Sir Philip to the little-known Retail Acquisitions was announced on 12 March last year. The group, headed by the former racing driver Dominic Chappell, is backed by a number of investors, including brokers and lawyers.

Despite concerns that the sale heralded a future break-up of the department store chain, Retail Acquisitions insisted it wants to steer the group back into the black. 

In December it hired turnaround specialist Aidan Treacy, a former finance director at the dairy giant Unigate, as its chief financial officer.

BHS has also introduced food and new fashion lines to a number of shops.

But the challenges facing BHS’s new owner include its underlying pension deficit, which rose to £139m in the year to 31 August 2014.

The retail analyst Nick Bubb said: “BHS sound confident of winning the landlord CVA, so BHS will live to fight another day and the situation is not completely hopeless, given the success of the food halls and new concessions.”