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Two high street retailers call in the administrators

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Image: Juelek
Image: Juelek

The British high street experienced a shock last week with not one but two retailers announcing that they have entered administration. British Home Stores (BHS) and Austin Reed both announced that due to falling profits and a challenging retail environment that the administrators have been called in to either sell the businesses or declare them bankrupt. The news comes as a blow to the high street. Both businesses have a long history. BHS has been a long established department store chain famous for its homewears, employing 11,000 people in 164 UK stores since 1928. Austin Reed, which started in 1900 selling off-the-peg suits in the City of London and once counted Winston Churchill as a client employs nearly 1,200 people in 100 standalone stores and 50 concessions, one of which is in York's department store, Brown's.

It is expected that a buyer will not be found for BHS. The retailer is in serious financial trouble with analysts comparing BHS's situation to the collapse of Woolworths in 2008. The business currently has £1.3bn of debts, including a pensions deficit of £571mn.

Last year, the previous owner Sir Phillip Green, who also owns a host of big high street chains such as Topshop and Miss Selfridge, sold the business for just £1. He purchased the company in 2000 for £200 million, however, he is expected to have earned over £500 million in dividends from the company during his 15 year ownership.
Given the large amount of debt and the pension deficit, it looks highly unlikely that a buyer will be found, especially as £215 million of debt was written off during last year's sale. The insolvency action is seeking lower rents to try and keep the business going and the government backed Pension Protection Fund has been notified to deal with the pension fund deficit.

Austin Reed, according to analysts, is in a better position to find a buyer. However the business has been struggling to compete against other brands with analysts pointing to inconsistent designs, tired looking stores and a poor website. The administrators are confident that a buyer will be found.

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