Gary Hobbs, senior equity analyst at Investec Wealth & Investment summed up that sentiment pointing out: “While conditions on the High Street have been tough, as witnessed by the likes of Next, we suspect that the travails at BHS are as much a function of their financial position as they are a reflection of slower trading.”
As a result, he said, there are unlikely to be any material ramifications elsewhere for retailers, but added that those landlords with BHS stores in their portfolio might have some work to do.
However, while the direct ramifications are unlikely to be significant, other retailers would be well served to look for lessons in the failure of the firm that has been on the UK high street since 1928.
Property
The major lesson is visible in the size of the firm’s store footprint and the breadth of its product range. In a world where online retailing continues to grow in scope and scale, having lots of big stores that sell a variety of different products in one place is no longer the convenience it once was. And, the trend toward just-in-time distribution makes such stores more cumbersome.
This is underlined by the fact that the firm said it has been unable to sell some of the properties it does own.
In a statement from Duff & Phelps, whose managing directors have been appointed joint administrators for the group, it said, not only has BHS been unable to find a buyer for the business, but also: “property sales have not materialised as expected in both number and value”. All of which meant it had been unable to meet its contractual payments.
In the current retail climate, where consumers are struggling, margins are narrowing and growth is tepid at best, nimbleness is becoming ever more important and the need for a large store footprint is shrinking rapidly.
That is not to say, however, that it is time to ditch all bricks and mortar retailers in favour of Amazon. Rather it is to point out that an ability to adapt is becoming increasingly important.
A point further underlined by last week’s announcement by menswear brand Austin Reed that it too has appointed administrators.
