BHS sold for £1 – Sir Philip Green announces disposal of loss-making chain

Retail tycoon Sir Philip Green has finally washed his hands of BHS, selling the troubled fashion and homewares chain to a little-known group of City investors for £1.

The token sale price reflects the struggles of a high street stalwart that has been hit by competition from more fashionable alternatives such as Primark and H&M.

BHS has lost almost 800,000 shoppers in the past five years and been overtaken by John Lewis, TK Maxx and Sainsbury’s in the rankings of Britain’s largest fashion outlets. It has been leaking profits too, posting a loss of £70m last year.

BHS is among the venerable British retail brands such as Marks & Spencer and Tesco that have struggled with a combination of aggressive newcomers – from Zara to Aldi – and the shifting tastes of shoppers. One expert said the store chain had failed to keep up with its increasingly fashion-conscious customer base.

“Bhs is still performing well among its traditional customers, those aged 55 and over. However, this age group is choosing to follow younger fashion trends so BHS will need to refocus its offer to continue to appeal to these shoppers,” said Simon Horner, head of fashion at market research firm Kantar Worldpanel.

Other experts were sceptical about claims from the new owners, led by a former racing driver with no retail background, that BHS can turn back the years and reclaim its status as a big beast of the British high street. One analyst predicted that the chain will go the way of former peers Woolworths and Littlewoods, who have vanished from town and city centres.

“There is unlikely to be a revival. I don’t think there’s a retail genius out there to recover this business as it has reached the end of its natural life,” said Richard Hyman, an independent retail analyst.

“BHS is a variety store and its peers, like Woolworths and Littlewoods, have already closed, while even Marks & Spencer is losing market share. The market has moved on. What we will see is BHS’s gradual demise.”

Green, the billionaire retail entrepreneur whose Arcadia group owns Topshop, Dorothy Perkins, Miss Selfridge and Evans, has controlled BHS for 15 years. The business was formally owned by his wife Tina, who lives in Monaco. In 2004, when BHS was enjoying better days, the family paid itself a £40m dividend from the retailer and a year later it collected a £1.2bn dividend from Arcadia.

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“It’s sad to see it go. 15 years is a long time,” Green told the Guardian.

As the fortunes of BHS have waned, a sale of the company has been on the cards for several years. The nominal sale price reflects the scale of the challenges facing the new owner, a group of investors operating under the name Retail Acquisitions. The group’s stores need investment to bring them up to date and the company is saddled with a pension deficit valued at about £100m in 2013, according to accounts filed at Companies House. BHS employs 11,000 people and has 171 UK stores, as well as 88 franchise stores in Russia and the Middle East.Retail Acquisitions is controlled by Dominic Chappell, a former racing driver. The entrepreneur, who does not have a retail background, has been involved in a number of failed businesses including the Island Harbour development in the Isle of Wight. He fell into personal bankruptcy in 2009. In recent years a spokesman said Chappell had backed business turnarounds including a Spanish oil distribution company called Olivia Petroleum.

BHS’s new owners intend to work with its current management team and are aiming to draw a high-profile retailer to chair the business. They want to expand the chain’s food and homeware sales. Clothes concessions from Green’s Arcadia group are set to remain fixtures of BHS stores.

“This is a fantastic opportunity to breathe new life into this iconic British high-street brand,” said Keith Smith, Retail Acquisitions chairman.

“We are convinced that with strategic and focused support we will return BHS to profitability and safeguard the workforce.”

A spokesperson said: “There are no big closure or redundancy plans. It is very much about driving the business forward and growing it over time.”

Founded in Brixton in 1928 by a group of American entrepreneurs who wanted to create a British Woolworths, British Home Stores became a stalwart of the British high street.

British Homes Stores expanded rapidly in the 1970s, with its stores featuring cafés and grocery departments as well as selling clothes. In its heyday it formed a joint venture with Sainsbury’s to create the now defunct SavaCentre hypermarkets. The 1980s were tougher and it merged with Sir Terence Conran’s Habitat and Mothercare to create Storehouse, which was listed on the London stock exchange. Conran changed the chain’s name to BHS but even his famous design talents failed to give the chain a fashionable twist, and he later regretted buying it. Storehouse later sold BHS to Green.

Storehouse later sold BHS for £200m in 2000. Green won plaudits for quickly bringing it back to profitability. It has been rumoured to be on the market for years, but he formally put the business up for sale in January.

BHSreported a 3.5% fall in sales to £675.7m in 2013. That year, pretax losses narrowed to £69.9m from £116m in 2012.

Although the sale of BHS was expected, retail watchers were scouring the internet on Thursday for more details about the new owners.

Retail Acquisitions was founded by a group of lawyers and businessmen in November 2014 as Swiss Rock Ventures, before taking on its current name in March.

The venture, which has offices in London’s West End, is chaired by Keith Smith, a former executive at corporate finance house Nabarro Wells.

Another founding director, Chappell, 48, is said to have got the deal rolling through his business contacts with Green.

Green said: “The business is handed over in a sound financial position with significant cash balances and banking facilities in place. I am confident that Retail Acquisitions Limited have a platform to grow the business and return it to profitability.”