Mar 4, 2016
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Retailer BHS plans job cuts and wants rent bill cut

Mar 4, 2016

The owners of struggling British department store chain BHS may cut 370 jobs as part of a restructuring that will require landlords to slash its rent bill to keep stores open.

The 88-year old retailer, hit hard by intense competition in its sector, said on Friday consultations had begun on plans to cut 150 jobs at its head office as well as 220 store management roles.

More jobs could go if BHS fails to secure the rent reductions it is seeking from landlords and closes stores.

The retailer, which is being advised by accounting firm KPMG, said on Thursday more than half its 164 UK stores would not be viable if it did not achieve major rent cuts.

The move comes a year after buyout firm Retail Acquisitions, a collection of little known investors, acquired the loss-making chain from billionaire Topshop owner Philip Green. At the time BHS traded from 171 UK stores and 88 franchise stores internationally, employing 11,000.

BHS has proposed a company voluntary arrangement (CVA) to its landlords, a form of compromise agreement to avoid administration or liquidation.

Its proposal would see 77 of its most viable stores retained at current rents, though paid monthly rather than quarterly, for three years.

A further 47 stores have been identified as being viable at a reduced equivalent monthly rent of either 75 percent or 50 percent.

The remaining 40 stores would continue to trade for a minimum of 10 months while negotiations with landlords are held on a reduced equivalent monthly rent of 25 percent. Stores will remain open where these rent reductions are achieved.

"It is hoped that the store closure number will be kept to a minimum," Brian Green, restructuring partner at KPMG, said.

BHS needs to secure at least 75 percent creditor approval at a March 23 vote for the CVA to go through.

Independent retail analyst Nick Bubb said it was likely landlords would, reluctantly, vote through the CVA plan, though some stores would close.

"A lot of the 40 worst stores will close, assuming that most landlords won’t accept a hefty 75 percent rental haircut," he said.


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