BHS is in administration, putting 11,000 jobs on the line
British Home Stores (BHS) has filed for administration, according to the Financial Times, putting 11,000 jobs at risk.
Administrators Duff & Phelps have been called in after rescue talks with Sports Direct and other retailers failed last night, according to the report.
BHS no longer has enough money to pay its outstanding bills. Duff & Phelps will try to sell BHS "as a going concern" — in other words, a functioning business — but that will prove a difficult task given that talks have failed up to this point.
See photos of the various products that have been sold at BHS:
Duff & Phelps may well be forced to cut jobs and in the worst case scenario could be forced to liquidate the business, resulting all 11,000 of BHS' employees losing their jobs.
Duff & Phelps sent the following statement to BI over email (emphasis ours):
Philip Duffy and Benjamin Wiles, Managing Directors at Duff & Phelps have today been appointed Joint Administrators of BHS (The Group).
The Group has been undergoing restructuring and, as has been widely reported, the shareholders have been in negotiations to find a buyer for the business. These negotiations have been unsuccessful. In addition property sales have not materialised as expected in both number and value.
Consequently, as a result of a lower than expected cash balance, the Group is very unlikely to meet all contractual payments. The Directors therefore have no alternative but to put the Group into administration to protect it for all creditors.
The Group will continue to trade as usual whilst the Administrators seek to sell it as a going concern. Further announcements will be made as appropriate in due course.
Business Secretary Sajid Javid has tweeted this morning that the government is "in close contact with the company's management":
Worrying news for #BHS workers this morning. Government is in close contact with the company's management at this difficult time— Sajid Javid (@sajidjavid) April 25, 2016
The Guardian reported that BHS owner Dominic Chappell sent a letter to employees on Sunday saying: "It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale."
He added: "I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep you heads held high, you have done a great job and remember that it was always going to be very, very hard to turn around," according to the Guardian. Chappell indicated that staff will be paid to the end of the month.
Chappell's Retail Acquisitions consortium bought BHS from Sir Phillip Green for £1 last year. Green had previously bought the chain for £200 million in 2000. The consortium attempted to turn around BHS' fortunes but falling sales, increased competition online and on the high street and a ballooning pension deficit of £571 million scuppered those plans.
The factors undermining BHS aren't specific to the company. Joe Rundle, head of trading at ETX Capital said: "It's not just BHS that's suffering - shares are down sector-wide over the last 12 months – reflecting investor caution about an industry that's increasingly dependent on cheap credit and little else to drive it."
"The concern is that if interest rates rise – which they will have to do sooner or later - consumers will quickly tighten their belts and dispense with their credit cards. Meanwhile, retailers' margins are being squeezed by the new living wage, which is driving up wage costs when there is little sign of meaningful sales price growth," Rundle said in an emailed statement.
BHS started in 1928 after a group of American entrepreneurs opened a shop in Brixton, making its debut on the London Stock Exchange five years later.