Green ratchets up pressure on Bhs suppliers

British Home Stores (Bhs), owned by the tycoon Sir Philip Green, has turned the screws on its suppliers as the billionaire merges the retailer with his Arcadia fashion group. Bhs, which has 185 branches, said it was increasing the discount rate for suppliers from 11.25 per cent to 14.25 per cent from 1 July, in a move that is reported to have angered some of them.

The increase in the discount rate is the latest blow to the garment industry, which is being hit by falling profit margins and orders. It also follows a tightening of terms imposed by other fashion retailers, including Matalan and Moss Bros over the past year.

In a letter sent to suppliers last week, the Bhs finance director Barbara Gentles said: "As part of this [merger] process, we are harmonising supplier discount rates."

In February, Sir Philip, right, said he was merging functions, including logistics, property and finance, at Bhs with those at Arcadia in an effort to save costs. Arcadia's brands are Topshop, Topman, Miss Selfridge, Burton, Evans, Dorothy Perkins and Wallis.

It is understood that the change in terms relates to all Bhs clothing suppliers, some of whom supply both the store chain and other Arcadia brands, such as Burton.

One supplier told the trade magazine Retail Week: "This wouldn't be an issue to anyone given enough time, but they are bringing this in with only six weeks notice and just after all the price negotiations for autumn and winter ranges and products have been negotiated."

Bhs and Arcadia declined to comment. As both are private companies, current trading is unclear. Given that underlying sales and profit at Bhs fell in the year to 29 March 2008 – before the worst the financial crisis in the UK – it is likely to have found trading challenging. Over the 52 weeks, Bhs's like-for-like sales fell 2.9 per cent and operating profit tumbled 40 per cent to £30.2m. For the year to 30 August 2008, Arcadia' operating profit was down 6.1 per cent to £275m. Topshop, Topman and Miss Selfridge outperformed the other chains.