Possible store closures, restructuring for flagging British Home Stores

Up to 40 British Home Stores could be closed over the next ten months, and the jobs of store managers left hanging in the balance, as the privately-held retailer outlined a new Company Voluntary Arrangement over its above-market rents on Friday.

The high street stalwart had been in trouble in recent years. It was a constituent of the FTSE 100 until being taken private by Sir Philip Green in 2000. It became part of Green's Arcadia Group in 2009, before being sold to Retail Acquisitions in March 2015 for the nominal value of £1.

BHS said in a release on Friday morning that it was essential to reset its costs in order to achieve a successful turnaround of the business, which it said had been loss making for many years.

The Company Voluntary Arrangement of BHS Ltd and BHS Properties Lts, which together account for 164 stores, would enable the group to address its 'legacy issue' of over-market rents in a large number of its stores.

BHS had already sought to reduce its property coses through a number of exits and rent renegotiations, but the firm said the arrangement was still needed to address a number of lease agreements in which it was still contracted to pay in excess of market rates.

"The CVA proposal that we have announced today is a necessary milestone in resetting British Home Stores to ensure its long-term future as an iconic British retail brand," said CEO Darren Topp.

"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," he added.

Under the proposal, BHS would seek a rent reduction at 47 viable stores, and continue trading at 40 unprofitable stores for at least ten months while negotiations with landlords were undertaken. Landlords at 77 viable stores would be retained at current rents.

Stores where successful rent reductions occur would remain open, with the company saying it hoped to keep the number of closures to a minimum.

"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," Topp said.

"BHS will continue to trade as usual," he confirmed.

The company also worked to assure its suppliers that the arrangement did not impact any of them, though the news was not as positive for it staff, with the company confirming a restructure and consolidation of store management was imminent.

British Home Stores was also in active discussions to address it staff pension deficit, it said.

At last count, there were 164 company-owned and 74 franchised BHS stores in 18 countries.