Retail Bites

Friday 29th April 2016

In case you missed them, a round-up of interesting retail related stories from the last week or so.

The demise of BHS on the High Street

After 88 years, BHS is on the brink of collapse and around 11,000 people could lose their jobs. The writing has been on the wall for some time given BHS’ failure to adapt to the times and its huge debts. But, BHS is an iconic brand and there is a very good chance the brand of BHS will live on. The administrators have said that around 50 parties have expressed interest in purchasing the business. BHS has around 164 stores and it understood around 124 are not profitable. So, my guess is that BHS’ will shrink its estate to around 50 stores in key locations having rid itself of £1.3bn of debt. If that happens, a lot of BHS staff will lose their jobs.

Austin Reed enters administration putting 1,200 jobs at risk

It’s a sombre update for Retail Bites this week. BHS, and now Austin Reed. But there is a difference and that difference is Alteri Investors, the distressed retail specialists. Recently Alteri invested in Brantano. Shortly after, Brantano entered into administration and Alteri bought the business back, with fewer, and profitable, stores. A similar model could be used here. Austin Reed could emerge a smaller and more cash generative business which Alteri will then look to modernise.

Living Wage leads thousands of firms to struggle

The effect of the NLW is just starting to filter through and how business deal with the additional costs is not straightforward. The Bakers, Food and Allied Workers Union  have suggested that 2 Sisters and Samworth Brothers are making changes to the their employee’s terms and conditions to off-set the impact of the NLW. Businesses, not just 2 Sisters and Samworth Brothers, are adjusting bonus/overtime payments and it is hard not to think that such adjustments may have been taken to offset the costs of the NLW . Of course the official line taken by businesses is that most employees are seeing their pay increase. Businesses who do not make similar adjustments to their employee’s terms may find that they cannot cope with the additional costs or that such costs have to be passed on to their customers. For food manufactures/retailers, being the first to increase prices does not make good business sense at present and if that remains the case, the NLW may not have the benefit intended in the short term.


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