In order to reset costs following many years of losses, retailer BHS has announced that it plans to enter a Company Voluntary Arrangement (CVA), in a move which, it says, will not impact any of its suppliers.
Although BHS has reportedly sought to reduce property costs for its 164 stores through exits and rent renegotiations, this proposed property-led CVA is still needed "to address a number of lease agreements in which the group is contracted to pay in excess of market rates".
The group also intends to reset its cost base, including a head office restructure and a consolidation of management levels in stores, and is in active discussions to address its pension deficit.
Darren Topp, CEO, comments: “The CVA proposal that we have announced 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. BHS will continue to trade as usual and we thank our staff and customers for their continued support.”
Under the terms of the proposed CVAs, 77 stores will be unaffected, a reduction in rent is being sought for 47 "viable" stores, while 40 stores will continue to trade for a minimum of 10 months whilst negotiations with landlords are undertaken to reduce the rents substantially. It is hoped that store closures will be kept to a minimum.
Store improvements begun under the original turnaround plan will continue, with restaurants and cafes renewed, a convenience food offering rolled out to most stores, new external signage, windows and in-store visual merchandising, and a fresh and enhanced product range will be introduced. BHS’ digital offering would be upscaled too, with the launch of a more functional online offering.
BHS was acquired by Retail Acquisitions Ltd (RAL) in March 2015. Shortly after acquisition, work on a turnaround plan was initiated which sought to restore the business to profitability.
