Sir Philip Green, the billionaire retailer, insisted yesterday he had no plans to "run away" from Bhs despite a profit collapse at his family-owned department store group that raised questions about his famed Midas touch and forced him to forgo a dividend for the second consecutive year.
The worst 12 months for the group since the Green family acquired Bhs seven years ago saw pre-tax profits fall 60 per cent to £42.3m. Sir Philip blamed poor womenswear ranges that alienated Bhs's core middle-aged customer and forced him to offer huge discounts just to clear his stock.
"You name it, we got it wrong. We had the wrong fashions, wrong shapes, wrong sizes," he said. Sir Philip has since got rid of the team responsible, which he hired in the wake of his failed £9bn bid for Marks & Spencer in July 2004, and installed himself "back in the saddle on a permanent basis".
During the year to 1 April, all of the group's key financial metrics fell. Its operating profit was 54 per cent lower at £48.5m - worse than the 30 per cent decrease he forecast in November. Like-for-like sales were down 7 per cent and the operating margin was 6.2 percentage points weaker at 5.6 per cent, which cost about £30m in lost profit. Total sales, which Sir Philip pledged to increase by £250m in autumn 2004, slipped 2 per cent to £860.5m.
"So we've had a profit dip. With respect, it's not life-threatening. I'm working 16-hour days trying to fix it," Sir Philip said. "This is the first blip in this business in the seven years since we've owned it. There's not a retailer on the high street that hasn't been taken out or had a fashion blip in that time."
The retailer, knighted in this year's Queen's Birthday Honours, is renowned for making the fastest billion pounds in British corporate history from Bhs. He paid £200m for the department store group, which was making £12m operating profit at the time, and claimed it was worth £1bn two years later. Two years ago he paid his family - his investments are in his wife, Tina's, name - a £200m dividend from Bhs, although this paled next to the £1.2bn he took out of his Arcadia fashion group last year.
Bhs's poor performance came during the toughest period for the high street in years. Retail sales went backwards, leaving clothing chains to fight tooth and nail for custom in savage price wars that ate into Bhs's market.
Richard Hyman, chairman of the Verdict retail consultancy, referring to the rise of the value-clothing sector during the past five years, said: "Even Philip can't wave a magic wand. The nub of the problem is that Bhs is the middle-ground retailer. It faces very stiff competition from below and above."
Sir Philip is still trying to develop a blueprint for Bhs's flagship store on Oxford Street in London that he can roll out to the rest of the estate. He spent £13m on acquiring and fitting out 10 new stores last year and £44m on buying three freeholds. He reiterated that he is prepared to pump £100m into Bhs if he can come up with a new format to drive sales.
Better ranges since April mean total sales and margin have edged slightly higher, while in the past seven weeks like-for-like sales have levelled off and total sales and margin have risen 3 per cent.
Sir Philip insisted Bhs was not up for sale, despite reports from industry sources suggesting he has touted the business around the City. "We are probably one of if not the largest family retail investor in the UK. Why on earth would be want to create a competitor for ourselves? We don't need to sell. Why would we want to do it?" he said.
He vowed to fix Bhs, adding: "In the UK, we're very quick to beat everybody up but I'm standing up and saying how it is. If I was running away you could all beat me up but I'm doing absolutely the opposite. Maybe the question should be why am I bothering? Because I care about it. I want to get it right."
Mr Hyman said Sir Philip faced a difficult task. "It's more difficult to drive sales up when the brand is catering for a less-than-ideal target market given the competitor background," he said. "But Philip is a fighter. He's very good at cutting his cloth according to the circumstances. He'll be fighting his corner and getting on the front foot."Reuse content