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Sun 27 Mar 2016 02:23 PM

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Gulf BHS stores “unaffected” by UK restructuring

Retailer’s UK owner insists no store closures in the Middle East after CVA

Gulf BHS stores “unaffected” by UK restructuring
BHS store. (Getty Images)

Franchised BHS stores in the Middle East will not be affected by a major restructuring of the British homewear brand in the UK, its holding company has said.

Last week, the struggling retailer approved a roots-and-branch restructuring plan – known in the UK as a company voluntary arrangement (CVA) – intended to avoid the company going into administration.

Under the plan, more than 40 of BHS’ 160-plus stores across the UK will close within months, and commercial landlords have agreed to reduce rent on more than half of the remaining stores, meaning they stand to lose millions of pounds of annual rent.

BHS’ creditors, mainly landlords, are owed nearly £517 million ($730 million), while the retailer is struggling to fill a pension pot shortfall valued at between £250 million ($350 million) and £550 million ($770 million), according to reports in the UK. The Government-run Pension Protection Fund is set to take control of that fund.

BHS chief executive Darren Topp said earlier this month that the CVA was a “necessary milestone in resetting BHS (British Home Stores) to ensure its long term future”.

He added: “Some of our stores are loss-making as we are being charged rents that are too high relative to today’s market.”

In the Middle East, Dubai-based Alshaya Group manages 26 franchised BHS stores across the Gulf – 13 in Saudi Arabia, 12 in Kuwait and one in Oman. In the UAE, the franchise is owned by Almaya.

While Alshaya Group itself would not comment on the likely impact of the UK restructuring, a spokesperson for BHS in the UK told Arabian Business: “I can confirm that no international BHS franchise stores will be affected by the CVA.”

Retail Acquisitions, which bought BHS from tycoon Sir Philip Green’s Arcadia Group for £1 last March, said in September it had ambitious plans to grow its franchised network internationally, including a store opening in Iraq this year.

The company has yet to respond to questions over whether this opening will go ahead as planned.

In the Gulf, Alshaya Group had to renegotiate all of its franchise licences following the sale of BHS to Retail Acquisitions last year – this is understood to have been a lengthy and complex process.

Alshaya also manages the franchises of other established UK brands such as Mothercare, Debenhams and Boots.

The group shut an undisclosed number of stores across the region in the past couple of years, but it is understood that any future closures of BHS stores would be due to local market conditions, according to a source, and not because of any impact from the UK CVA.

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