Store chain BHS plans talks to stave off threat of closure to its Hartlepool branch
A Hartlepool store has been identified as one of 40 threatened with closure unless rent levels can be reduced.
National department store chain BHS has entered into a company voluntary arrangement as it battles to restructure its finances.
And it has taken on accountancy firm KPMG to act as the supervisor in the process.
The hope is that talks can be held with the landlords of the sites where BHS has dozens of stores all over the country - with the aim of bringing rent levels down.
BHS has 164 UK retail sites. Of those, the 77 most viable will be retained at current rents.
At another 47, talks could be held to try and get rent reductions down to 75 or 50 per cent of their current levels.
But the BHS branch in the Middleton Grange Shopping Centre in Hartlepool is one of 40 where even tougher measures are being proposed.
Under the plans, a reduced equivalent monthly rent of 25% would be paid for a minimum of ten months. If the deal is accepted, it could lead to the branch remaining open, say bosses.
Brian Green, restructuring partner at KPMG and one of the proposed supervisors of the CVAs, said: “The remaining 40 stores will continue to trade for a period of a minimum of 10 months whilst negotiations with landlords are undertaken to reduce the rents substantially.
“Where rent reductions are achieved, these stores will remain open. It is hoped that the store closure number will be kept to a minimum.”
KPMG officials said the plans were indicative of the BHS reduction in profitability in more recent years.
Will Wright, restructuring partner at KPMG and proposed ‘supervisor’ of the CVA, said: “For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing.
“Today’s CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.
“While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment. The company needs to secure at least 75% creditor approval for these CVAs.”
The creditors will vote on the CVA on March 23, and KPMG will spend the next three weeks in talks with creditors to ensure they understand the full detail of the proposal.
It is only four years since BHS opened its Hartlepool branch which provided jobs for 50 people.
At the time, the addition to the shopping centre was hailed as a big coup for Hartlepool.