As department store chain BHS files for administration, we examine what has gone wrong for the 88-year-old retailer.


BHS’s product offering, particularly in fashion, is one of the main reasons its fortunes have declined. 

In 2000, BHS attracted 13.4% of all clothing shoppers through its doors, according to analyst Conlumino, helping it achieve a 2.3% share of the clothing market. 

Last year the chain attracted just 8.2% of all clothing shoppers and its share of the clothing market had slipped to 1.4%.

“Today’s failure of BHS brings to a close a long period of decline which has seen the chain fall out of favour with British shoppers thanks to its failure to respond to changing tastes and the intensification of competition on the high street,” says Conlumino chief executive Neil Saunders.  

“Such a decline reflects the fact that even to its core older audience, BHS has become something of an irrelevance. The chain’s ratings on price, quality, value and range have all fallen thanks to the rise of more compelling alternatives.”

Those compelling alternatives are numerous: the grocers and value retailers such as Primark have cornered the basics market, while chains such as TK Maxx have provided a more aspirational product at an affordable price.

Other department stores, such M&S and Debenhams, while they have their problems offer a more upmarket proposition. Etailers such as Shop Direct and N Brown have also raced ahead in recent times.

“BHS doesn’t have the brand desirability,” says Verdict Retail analyst Honor Westnedge. “There is young value fashion such as Primark, New Look, H&M targeting young people while Bonmarché has been much better over the past few years, so it’s losing footfall from all angles.

“And bringing in Arcadia brands has had little impact because the shoppers BHS does have are buying BHS core brands.”


BHS’s store estate is another area in which it falls down when compared with other department chains.

Even its Oxford Street flagship, on which it sold the lease earlier this month in order to raise funds, is tired-looking and stands in stark contrast to the flagships of other nearby department stores.  

Cushman & Wakefield UK and European retail head Justin Taylor says he expects other retailers and businesses to already be eyeing BHS’s estate.

“We have already seen the likes of restaurants and cinema operators unlock value in large unused sites by specifically targeting upper floors and we would expect a large amount of interest from retailers and leisure operators keen to exploit these prime location sites,” he says.  

Pension deficit

BHS’s two pension schemes, with around 20,000 members, have a combined deficit of £571m. As this sum is greater than the scheme’s assets, the retailer has been unable to find backers or buyers for the business as a whole.

The schemes were assessed for entry into the Government-backed Pension Protection Fund last month, and BHS’s former owner Sir Philip Green has faced pressure to contribute to the cost of bailing them out.

Green has offered to put £80m into the BHS pension scheme, according to reports. However, The Pensions Regulator is understood to be considering asking Green to pay £280m. 

BHS staff are expected to receive at least 10% less than they were due for their retirement pay-out. 

Rent hikes 

BHS has been hit by unsustainable rental costs and long leases. 

Locked into long contracts which are subject to upward-only rent reviews, the company has ended up paying considerably above market rate at many of its 164 stores, according to BHS management.

Prior to last month’s CVA, chief executive Darren Topp said that reduced rents were essential for the department store group’s survival.

He argued the business was paying above the market rent at a “chunk of stores” and that the deals were made “at a time when the retail world was very different”.

For example, the lease on the store in Clydebank, Scotland, was agreed in 1979 and runs until 2103. According to reports, BHS is paying £404,000 a year, which Savills estimates is 65% above market rent. 

Last month’s Company Voluntary Arrangement (CVA) resulted in slashed rents at a number of BHS’s shops.

However, to stay afloat, the retailer still needed to borrow money and sell property in order to raise £100m.    

Despite the CVA securing rent cuts of up to 75% on 87 shops, the amount raised from property sales has been disappointing.

Poor decison-making?

Green bought BHS for £200m in 2000 and sold it in March last year for £1 to Retail Acquisitions. Since then there have been questions raised over the ability of the new owners, led by former bankrupt Dominic Chappell, to breathe new life into the business.

Retail analyst at Economic Intelligence Unit Jon Copestake says: “On the operational side, having purchased the retail chain for just £1, Retail Acquisitions has shown little appetite or acumen for retail management, despite its name.

“Its owner Dominic Chappell is a former racing driver with more experience of bankruptcy than retail. In addition to his hefty salary he has been involved in a number of questionable transactions, such as reportedly diverting funds borrowed by BHS to its directors while pushing landlords to accept rent reductions.

“On the retail side a successful repositioning of the brand and product portfolio has not materialised and much of the company’s recent strategy has centred on selling off prime properties to keep creditors at bay.”

However, Chappell was reported today saying that there was “no one to blame”. He said it was a “combination of bad trading and not being able to raise enough money from the property portfolio”.