Three of the country’s top retailers have teamed up to rescue Bhs from the fate awaiting other chains on the UK high street – terminal decline followed by complete annihilation.
As C&A prepares to close its doors for the last time and Littlewoods repositions as a discounter (and, quite possibly, prepares to quit the high street altogether), the crisis at Marks & Spencer appears to be deepening by the day.
Meanwhile, Bhs, with its 155 high street stores, has lost sight of its customers and let its brand become so vague, it no longer stands for anything. But help is at hand.
As dream teams go, you would be hard-pressed to beat the recently assembled driving force behind Bhs. After buying the chain for &£200m in April, retail entrepreneur Philip Green hired former Debenhams boss Terry Green as chief executive and Allan Leighton, former head of Asda, as chairman.
This is the clique Philip Green had in mind during his attempt at a hostile takeover of Marks & Spencer last February. But with three of the biggest egos in retail crowding around the Bhs boardroom table, sparks are expected to fly.
Turning around Bhs is no easy matter, and could make Terry Green’s stewardship of Debenhams and Leighton’s tenure at Asda look like child’s play.
Dream teams have been assembled before, but not always happily. The Knutsford saga saw some other big retail names join forces. But the result was almost Titanic-like as the “Gang of Four” failed to deliver, amid speculation that decision-making stagnated under the weight of such forceful characters.
Former Asda chief Archie Norman, dealmakers Nick Leslu and Nigel Wray, and Richer Sounds boss Julian Richer formed the shell retail takeover group Knutsford in late 1999, buying up shares in an obscure leather goods maker for 2p. At the height of the rush, shares reached 265p but, when the group failed to take over anything more substantial than Internet company WiLink, they plummeted and now stand at around 5.25p.
At Bhs, wheeler-dealer Philip Green will lead the two retailers but analysts say there will need to be a strong sense of direction and clear guidelines of responsibilities for each of the players.
Terry Green comes from the branded retail environment of Debenhams and Leighton from the mass marketing background of Asda.
Retail Intelligence director Clive Vaughan says it is too early to say how they will get on on a personal level, but he sees Philip Green taking a back seat in the day-to-day running of the chain.
“It is a two-man show. Philip Green is a dealer, rather than a running day-to-day man. He has two strong individuals and I cannot see him being involved greatly in a day-to-day role.”
According to former Bhs marketing chief Helena Packshaw, who now heads consultancy Helena Packshaw Associates, Terry Green has strength and dogged determination, while Leighton’s abilities lie in his talent for asking pertinent questions. She believes it will be Leighton’s role that will not be very hands-on, more in the context of formulating strategy than getting his hands dirty with retail operations.
“I think sparks will fly. If sparks are not flying then there are problems. It is no bad thing – it helps to hone everyone if things are argued out,” she says.
Bhs has faced similar problems to Marks & Spencer, trying to hold on to market share in the face of a two-pronged attack from fashion specialists and discounters. With stores in prime high street locations, running costs are high and there has been a lack of internal investment.
The chain recorded an underlying yearly profit to April 2000 of &£13.1m on sales of &£822.4m, down drastically on the &£86m profit on sales of &£813.7m the year before.
The company is owned privately by Philip Green – an advantage, according to analysts, because spending, profits and sales are all kept away from the eager eyes of the City. But that is expected to change: Green has said in the past that he will look at floating the company once the turn-around is under way.
Packshaw says that although Bhs has not been floated and therefore figures remain private, Philip Green is still keeping the City informed of plans for the business. “Philip Green had the reputation of being a bad boy but the City has given him credence because of the Sears property deal. He managed to make a few people look silly and sold it for exceptional money,” she says.
Packshaw adds that this year’s autumn/winter lines would have been too soon for Philip Green to change and the first likely changes of range will probably be seen in the spring lines.
The Bhs brand is well recognised, with 90 per cent of people knowing and having some sort of opinion of it, says Vaughan, but since the departure of Sir Terence Conran in 1990, the brand focus has been vague.
The general view is that Terry Green will strengthen the Bhs brand with better quality and value, while bringing in outside designers to improve the stores.
Vaughan believes Terry Green will add greater clarity. “Pricing will be an issue – he will seek to be quite competitive and pick up the C&A market share,” he says.
The other major shift will be in the middle market itself. Packshaw says that 18 months ago, 98 per cent of the clothing trade was middle market but customers were becoming more “savvy”.
“They have to be very, very clear about who they are targeting. You cannot have everybody in your store. The average 20-year-old is uncomfortable about shopping next to a 50-year-old,” she says.
Verdict Research director Mike Godliman says: “I will be very surprised if in the next two years they don’t look elsewhere. Bhs will not be big enough.”
Will Marks & Spencer be back on the hit-list for Philip Green? The City thinks not. It is too big with too much property, say analysts, and there are too many problems that will have to be changed from inside.
It will be next year before any new direction for Bhs becomes clear but, as Vaughan says: “If they can’t do it, nobody can.”
Bhs shoppers and staff – and three of the biggest egos in retail – will be hoping the dream team does not turn into a nightmare.