STOREHOUSE TO SELL BHS CLOTHING CHAIN
Byline: James Fallon
LONDON — Storehouse PLC said Monday it planned to sell its Bhs department store chain to entrepreneur Philip Green for about $316 million in cash in the latest shakeup among the U.K.’s struggling retailers.
Bhs is the U.K.’s fifth-largest clothing retailer with 154 stores in the U.K., selling primarily private label merchandise. It has 76 franchised stores in Continental Europe, the Middle East and Asia. Green is the British investor who late last year considered mounting a bid for another troubled retailer, Marks & Spencer PLC, but in the end backed out.
Completion of the deal is expected in late April or early May, a Storehouse spokeswoman said. Storehouse has agreed to pay Green’s company Newco a break fee of $15.8 million if the deal falls through. A Green spokesman said the final amount to be paid would be determined after due diligence on Bhs, but he expected it to be close to $316 million.
After the sale, Storehouse will be left only with its Mothercare chain of children’s wear stores, which it plans to retain. Mothercare operates about 340 stores in the U.K. and 170 franchised stores overseas.
Green is known primarily for buying undervalued assets and then breaking them up for a profit. His most successful investment in that manner was the purchase of the British women’s apparel retailer Sears PLC about 18 months ago. He sold Sears’s various women’s apparel chains to other U.K. retailers.
However, the spokesman for Green said Monday that he planned to run Bhs and turn its operations around. “He has said he plans to approach it with an open mind,” the spokesman said. “It is a well-known brand that has lost its way.”
Green plans to focus on repositioning the Bhs brand and product offerings and improving its customer traffic, the official said.
Bhs, like most of Britain’s middle-market retailers, has been struggling with declining profits and sales as a result of the growing fashion awareness of the U.K. consumer and increased price competitiveness from British and overseas retailers. These include Gap, Next PLC, French Connection PLC, Zara and Hennes & Mauritz.
The department store group had operating losses of $13.1 million on a 7.4 percent drop in sales to $585.7 million for the 28 weeks ending Oct. 10, 1999. This compares with operating profits of $45.7 million on sales of $632.6 million in the corresponding period a year earlier. For the year ending March 27, 1999, the department store company reported operating profits of $136.5 million on sales of $1.35 billion.
The chain in recent seasons has tried to increase the fashion in its collections by linking up with British designers to have them do exclusive collections for Bhs. The designers include Joelynian for swimwear and beachwear; Paul Frith and Owen Gaster for women’s apparel; Graham Smith for hats, and Charlie Allen for men’s wear.
But Bhs and Storehouse have struggled for the last decade to carve out a strong niche in the British market. In 1989 the Storehouse management recruited American David Dworkin, former head of Bonwit Teller, to turn around the company that was then known as British Home Stores. Dworkin and his team, many of whom were American, briefly succeeded through better merchandising, improved logistics and systems, and a focus on selected product categories such as lingerie.
The turnaround at Bhs led to Dworkin being named chief executive of Storehouse in July 1992, but he left seven months later to become chief executive of Carter Hawley Hale. He was succeeded by Keith Edelman, who resigned late last year because of poor health.
Storehouse effectively put a “For Sale” sign on its operations in November 1999 when it announced plans to split into two units — Bhs and Mothercare — by 2001.
The group has held talks with several potential bidders for Bhs in the last few months, including the discount retailer Brown & Jackson and the food retailer Iceland, which has a joint venture to operate food departments in selected Bhs stores.
Both of these companies backed out of the talks last week while a third interested party, British investor Stephen Tucker, based in Monaco, simply proposed replacing the Bhs management with his own team. Tucker never made a firm offer for Bhs, the Storehouse spokeswoman said.