BHS is seeking rent reductions on more than half of its estate and has warned it will otherwise be unable to meet financial obligations.
BHS, which was sold for £1 a year ago by retail tycoon Sir Philip Green to Retail Acquisitions, aims to bring down its property costs through a company voluntary arrangement (CVA) with landlords. It is asking for rent reductions of up to 75% on some stores, it is understood.
The 164-store retailer has also unveiled plans to reinvigorate the business by cutting costs, restructuring and enhancing its proposition.
It said the CVA would address a “legacy issue of over-market rents”, which have undermined BHS’s financial performance. The retailer has been loss-making for some years.
Assuming a successful CVA the retailer would be able to “reset, refocus and rebuild”, chief executive Darren Topp told Retail Week.
There would be a restructure of its head office, “consolidation” of store management roles, improvements to the offer such as a reduction in across the board promotions and clearer pricing, as well as the creation of a better online business.
BHS has divided its stores into three categories for the CVA: a group of 77, which would be unaffected; 47 which would be viable if rents were reduced to “market levels” and 40 which could trade for 10 months while negotiations with landlords were conducted to reduce rents “substantially”.
Topp said he hoped the number of stores closed could be kept to “a minimum”.
He said: “The CVA is a necessary milestone in resetting British Home Stores to ensure its long-term future as an iconic British retail brand.
“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.
“Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan that we have identified, and gives British Home Stores a secure financial footing from which to grow and deliver sustainable profitability.”