Darren Topp is bracing himself for a “bumpy few weeks”. The chief executive of BHS and his fellow directors yesterday placed the retailer into a company voluntary arrangement in an attempt to force landlords to renegotiate the leases and rents on half of its estate of 164 stores.
The CVA is the latest chapter in the colourful corporate history of BHS, which opened its first store in Brixton in 1928. A picture of that first outlet on the south London high street dominates Mr Topp’s office in BHS’s Marylebone Road headquarters. “Hopefully, we will reopen it one day,” he says.
Over the past 80 years BHS has been at the centre of a string of corporate battles: from the merger in the 1980s with Habitat and Mothercare, which created the Storehouse conglomerate, to its takeover by Sir Philip Green two decades later. Today it is at the centre of a fight to ensure its survival.
Mr Topp has no doubt the chain will emerge “fitter and stronger” from the CVA. He says he has no other option than to go head-to-head with landlords. The only way BHS can emerge as a “leaner, fitter machine” is if landlords share some of the pain of the retailer’s difficult turnaround programme.
Speaking exclusively to The Times, Mr Topp said in some cases the group would be seeking “substantial reductions” in rent. “We have been speaking to landlords for the last 12 months and we have made it clear that we have this chunk of stores that simply don’t work. I think the key message for me is they [landlords] have had it good for a while. We have been paying above the market rent — often hundreds of thousands of pounds above — in a lot of locations for a long time. They have had a good run at it for a long time and all we are asking for is to pay the market rent for these units.”
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Mr Topp said even though carrying out a CVA would be controversial he believed it was a “positive way to accelerate some of the turnaround work we are doing”. KPMG, which has been advising BHS on its options over the past few weeks, has been nominated to run the CVA, which will be decided by a vote on March 23. More than three quarters of BHS creditors by value — which as well as landlords includes its pension fund, HSBC, Grovepoint Capital and Gordon Brothers — will need to vote in favour of the action. Sir Philip Green’s Arcadia, which sold BHS for a nominal £1 to the little-known consortium Retail Acquisitions last March, is also a creditor.
Mr Topp said no other creditors would be affected by the CVA and that the business would trade as normal and staff and suppliers would continue to be paid. He added that BHS was having “constructive discussions” with the trustees of its pension fund, which has a £207 million deficit, and hoped to reach an agreement soon.
“We don’t want people feeling uncomfortable that don’t need to,” said Mr Topp. “The key thing is that what emerges is a significantly stronger business.”
The executive, who spent more than 20 years at Marks & Spencer before taking over at BHS, said he would use the CVA to “ look at the cost base of the whole business”. It has been reorganising its head office to remove costs.
However, news of a CVA will be greeted with dismay by some as the process can leave shop owners with large liabilities.
Last throw of the dice
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Mr Topp said that without a reduction in rent BHS, which employs about 8,000 people in Britain, would not be able to meet all its obligations: “I recognise if I have got a house and someone is paying me twice the rent every month that I’d probably want to keep it going for as long as I could. The reality is we have a chunk of stores dragging the rest of the business down.
“We are not blaming landlords and we understand their position but landlords have got to understand our position. Paying above the market rent is not sustainable.”
Mr Topp said he was confident that landlords would vote in favour of the CVA. He said there was also “good evidence” that measures BHS was taking to improve the business, such as rolling out its food format and introducing concessions such as Claire’s Accessories, were working.
“We believe we have a clear place on the high street. This is a brand that started in 1928 and there is no reason why it shouldn’t be here in 2028.”