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I recently hosted a breakfast for retail executives at our Head Office on Cannon Street. Michael Hitchcock, recently appointed CFO of LK Bennett and previously a financial adviser at BHS, joined us as our guest speaker to talk about the ‘Lessons to be learned following the collapse of BHS’.
There is a book that could be written on the story of BHS and no doubt a film thereafter, but in Michael’s 15 month tenure as financial adviser there is little he hasn’t seen in this chapter of his retail career. His talk and the subsequent round table discussion were under Chatham House Rule so what follows is an abridged overview of the morning.
Michael was introduced to BHS via Odgers Interim. He took on the interim adviser role as he was attracted by the brand; a UK heritage retailer turning over c£800m with a strong and credible operational management team. The business had its spring / summer ’16 collection in place (the first independent from Arcadia), a balance sheet with credible assets and the promise of ongoing cash to support the business from the owners, Retail Acquisitions Ltd. Most importantly, there was an achievable turnaround plan, focusing on six areas:-
- Exit the loss making stores and reset current rents to market levels
- Get the central cost base under control; at the time of joining these represented c15% of sales
- Introduce a retail food offering, branded concessions and outsourced the café and eating offer
- Develop the profitable international business; existing 80 stores across 18 countries
- Grow online from 10% of total sales with a new independent and up to date platform
- Find an equitable solution to the pension fund deficit
The Pension deficit always made it difficult for whoever owned BHS to borrow whilst cash issues haunted the business. BHS executed a property led CVA, ultimately backed by 97% of landlords. At this point Michael left as the re-financing deals on the table were in his view not fit for purpose and conducive to the long term survival of the business and the funding promised by Retail Acquisitions Ltd to support the business had not materialized.
The objective of the management team at BHS was always to save the business with the credible turnaround plan, protect 11,000 jobs and find an equitable solution for the pensioners. Michael praised the resilience of the staff and the importance of having a good collaborative team during what were incredibly stressful periods; there is no place for ego in a retailer at any level of the organisation. If you operate in a fair and honest way people will respond accordingly and go above and beyond their duties and this was evident at BHS certainly amongst the operational board. Since it’s demise, estimates suggest c90% of BHS employees have found jobs. The BHS brand and intellectual property are now owned by the Al Mana Group and it has recently made a successful return as an online retailer playing to the brands strengths, particularly in lighting and homeware. If successful, is it unreasonable to think that BHS could eventually return to the high street?
For more information, please contact Jonathan Flynn.
“The session was excellent, good open candid conversations in a relaxed environment. The breakfast was excellent too, thank you for the invitation and your hospitality.”
“I thoroughly enjoyed Michael’s presentation.”
“Thank you for the hosting the breakfast session, I found it quite thought provoking. Michael's insights were particularly illuminating.”
“Many thanks for your kind invitation to the breakfast meeting… I very much enjoyed the whole session listening to Michael with the general discussion that followed.”