It was once one of the biggest names on the high street, but talk has turned to how BHS’s administration will impact locations across the UK.
As revealed by Retail Week last Friday, the embattled department store group was teetering on the brink and ultimately plunged into administration this morning after rescue talks failed, throwing the future of its 164 shops – and 11,000 employees – into doubt.
High streets and shopping centres up and down the country will today be contemplating life without the 88-year-old business, while landlords begin to think about alternative uses for BHS’s huge units.
But while that presents a problem on paper, experts believe the possible death of one of UK retail’s biggest names could actually breathe new life into the Great British high street. Ironically this is something BHS boss Darren Topp called for help in achieving when he spoke at Retail Week Live just weeks ago, when he urged local authorities, central Government and retailers to work together to boost high streets.
BHS’s problems have been well-documented. The business has been loss-making for seven consecutive years, it was sold by Sir Philip Green for the nominal sum of £1 to Retail Acquisitions a year ago and last month it entered into a Company Voluntary Arrangement (CVA) to reduce the rents on its stores.
Bearing in mind such a turbulent recent past and problematic present, is it time for BHS to bow out and make way for more relevant retailers?
Simon Morris, director at retail property consultancy GCW, believes “many” towns and cities would benefit from BHS’s demise.
“There’s still a shortage of stock for large space occupiers because there’s not been an enormous development pipeline like there was pre-2010,” Morris says.
“BHS is an old fuddy-duddy fascia which isn’t really dragging people to the high street in the same way an H&M would.
“If it will improve retail locations, by having new vibrant brands in, that’s got to be positive.”
“This offers, in many locations, the opportunity to take these units and use them for more current and viable retail operations.”
Diane Wehrle, Springboard
“This offers, in many locations, the opportunity to take these units and use them for more current and viable retail operations, either a big anchor store or break them up into smaller units to have new retailers coming through onto the high street,” Wehrle suggests.
“It can breathe life into a number of high streets that are currently weighed down by old retail propositions such as BHS.
“Places like Mansfield have a BHS, which is a clearly historic occupation. Mansfield is now competing against Leicester, Derby, Nottingham – all of which have had either development of new retail or are looking at increasing their retail offer.
“To have a retailer that is not trading well within your high street doesn’t benefit Mansfield. If that store can then be transferred into another use, that would be great. The risk in somewhere like Mansfield is that there will be no takers for the store because it possibly has so much competition that it is not regarded by retailers as a viable location.”
Morris and Wehrle suggest that M&S stands to be the main beneficiary from BHS’s potential disappearance from the high street, due to its similar price points and target customer, while the own-label clothing ranges of supermarket giants Tesco and Sainsbury’s could also receive a boost.
“This will simply push trading back to their branded stores,” Wehrle suggests. “In large part, those concessions are an historic trading characteristic of when it was owned by Sir Philip Green.
“Apart from someone like Claire’s, I don’t think there was any strategic entry into BHS. They were just a hangover from the old trading proposition. By the very nature of the fact that people aren’t shopping in BHS, that indicates that they aren’t hugely successful concessions.”
High streets may be looking forward to a brighter future without a BHS presence, but the impact on landlords appears less cut and dried.
According to the CVA document BHS proposed in March, creditors stood to lose up to £1.3bn if the department store chain collapsed – with store landlords bearing the brunt of that unpaid debt.
But in the longer term, landlords could find themselves better off by bringing more successful retailers into their properties.
“All change creates opportunity,” Cushman & Wakefield’s head of UK and European retail Justin Taylor insists.
“Landlords will have seen this looming and given consideration about utilising this retail space and how new approaches can breathe life into shopping centres and high streets in need of reinvigoration.”
But Morris suggests the response would be “mixed”, adding: “There will be an element of definite frustration in terms of landlords thinking: ‘Was the CVA just totally unnecessary and why did we go through it?’
“It will be good news for some, bad news for others because some stores will be going backwards on rent at a fairly fast pace.
“There will be a third group of landlords in the middle who are shrugging their shoulders because someone like Sports Direct can pick up the stores and move them forward on the existing rental terms.
“In some instances, landlords will undoubtedly get better terms – it just might cost them to do it in terms of redeveloping the stores to suit retailers’ requirements.
“It won’t happen across the board, but there will definitely be instances where some landlords will get improved terms.”
Although the BHS-shaped storm clouds are gathering on a dark day for the retail industry, many high streets, shopping centres and landlords across the UK could find themselves benefiting from a silver lining in the years to come.