Sir Philip Green is to hand over ten Bhs stores to Primark, his rapidly expanding cut-price rival, as he begins a radical shake-up of his vast retail estate.
The Topshop owner has already said that the future of his ten million sq ft (900,000 sq m) portfolio lies in fewer, bigger stores, but until now has not indicated that larger Bhs stores may also shut as he refashions a store estate that includes most high streets.
Last year Sir Philip merged Bhs, which he bought in 2000 for £200 million, with his Arcadia Group, which includes Topshop, Miss Selfridge and Burtons, the fashion chains. The entrepreneur declined to reveal financial details before the merger, although he said that the chain remained profitable. Ian Grabiner, the chief operating officer of Arcadia, was given day-to-day control of Bhs after last year’s merger.
Sir Philip plans to introduce Arcadia’s mainstream brands — mid-market names, such as Dorothy Perkins, Evans and Burtons — into Bhs stores to create a “house of brands”, closing between 200 and 300 small standalone stores. Aracadia brands have been brought into 35 of Bhs’s 185 stores already, where the company says they are trading well.
As well as adjusting the store portfolio and bringing in Arcadia brands, Sir Philip wants to add a convenience food offering in a partnership with a leading supermarket and to introduce beauty products. He hopes to reduce Arcadia’s rent bill and create a more theatrical shopping experience in bigger venues.
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It is understood that the closure of the Bhs stores is a one-off, reflecting Primark’s hunger for new space. Sir Philip still plans to open six more Bhs stores.
Yet the passing of leases to a rival clothing retailer will raise questions over the profitability of Bhs. The fashion and homewares chain is believed to have suffered in the downturn as the housing market slowdown hit home-related spending and midmarket fashion entered a slump, coming under pressure from companies such as Primark.
In the year to August 29, Arcadia recorded profits of £214 million, up 13 per cent, on sales of £1.9 billion, up 2.7 per cent. The figures include six weeks of Bhs takings after it was folded into Arcadia.
Sir Philip’s transformation of the chain in the early part of the decade led to him being lauded for making Britain’s “fastest-ever billion”. He succeeded in revamping and rebranding the old British Home Stores, which had been languishing as part of Storehouse Group.
The 350 staff of the ten Bhs stores to be transferred to Primark were given their notice on Friday. The closures will be staggered over the next year.
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Last week Associated British Foods, the owner of Primark, reported soaring trade. Total sales rose 19 per cent. Even excluding revenue from its new stores, sales rose by an estimated 6 per cent, during the last four months of 2009. By volume, it is one of the biggest sellers of clothing in Britain, running neck-and-neck with Marks & Spencer and Asda.