Storehouse plans to split into Bhs and Mothercare as it slides into a pounds 16m loss

STOREHOUSE, THE struggling retailer that owns the Bhs and Mothercare stores, yesterday announced plans to split the two chains into separate companies.

The news came as the group announced a pre-tax, pre-exceptional loss of pounds 15.7m in the 28 weeks to 9 October and said it would pass its interim dividend.

Storehouse's chairman, Alan Smith, said the company has yet to decide on how the restructuring will work. He said: "The options are to float the two companies separately, demerge one from the other or find new partners." The move will dismantle the structure created by Sir Terence Conran, the entrepreneur and restaurant owner, in the 1980s and will involve separating the distribution and warehousing operations that it only recently bundled together.

Analysts said the move may be designed to make the Bhs and Mothercare chains more attractive as bid targets. Rowan Morgan, of Teather & Greenwood, said: "The best shareholders can hope for is a bid." But Storehouse said the rationale was to develop two distinct strategies for the brands.

Storehouse outlined its recovery plans for both Mothercare and Bhs. These will include more space for homewares and gifts at Bhs, plus reintroducing food into these stores via a joint venture with Iceland, the supermarket chain. Bhs also aims to reduce prices by about 15 per cent to become more of a value player.

Mothercare will focus more on merchandise for babies and pre-school children as well as launching a transactional website, Mothercare.com, in the spring and boosting its existing Mothercare Catalogue.

One-off costs for restructuring Mothercare are estimated at between pounds 25m and pounds 30m, plus a further pounds 5m for the development of Mothercare online. The cost of the Bhs changes have not yet been determined.

The restructuring will involve 115 redundancies in the group's head office, where it employs 1,000, costing between pounds 2m and pounds 3m. The majority of the staff affected will come from Bhs.

But the group also plans to create an additional 1,000 posts at its Mothercare stores over the Christmas trading period.

Mr Smith said the Storehouse holding company would dissolve in 2001, indicating that it has abandoned its search for a chief executive to replace Keith Edelman, who resigned in May after the first decline in annual profit for seven years.

Bhs sales in the UK for the first five weeks of the second half were down 6.4 per cent on a comparable basis while Mothercare's sales fell 2.3 per cent. Storehouse's half-year losses compare with profits of pounds 38.7m last year. Group sales fell to pounds 601.1m from pounds 648.3m. Storehouse shares yesterday fell 9p to 64p.