Marks & Spencer is expected to be the biggest winner from the collapse of BHS as its older clothing shoppers switch allegiance to the high street grande dame.
“We expect Marks & Spencer to be the biggest beneficiary, given its market share and older customer demographic,” said RBC analyst Richard Chamberlain. “We estimate BHS has around 1% of the [clothing] market and has the most similar product offer to M&S.”
M&S’s clothing business has struggled to compete with nimbler rivals such as Primark, Zara and H&M in recent years, achieving growth in only one quarter in the past five years.
If M&S hoovers up the stricken retailer’s sales, Chamberlain estimates it could boost its clothing and homeware sales by up to 1%, although if a fashion rival purchases some of BHS’s 164 stores the tailwind would be reduced. BHS recorded annual sales of £668m at last count. The sale fillip would be good news for M&S’s new chief executive, Steve Rowe, who took over from Mark Bolland at the start of last month.
Duff & Phelps, BHS’s administrators, have had 50 expressions of interest in the business although only 10 are thought to be serious. Mike Ashley’s Sports Direct has indicated it could bid for BHS, while Preston-based property millionaire Yousuf Bhailok and Allan Leighton, the retail turnaround specialist who currently chairs the Co-op, are also interested in taking on BHS.
Fashion retailers have been enduring a miserable year as the mild winter resulted in disappointing sales of high-margin winter clothing, while the cool spring has similarly subdued demand for new-season ranges. Analysts say there are too many mouths to feed on a high street battling the growth of online retailers while staff costs are rising due to the national living wage. The strengthening US currency is also a problem because retailers buy many garments in dollars but sell them in sterling.
Fashion giant Next is due to update the City on first-quarter trading on Wednesday, with Chamberlain predicting that like-for-like sales at its stores will be down at least 3% and sales from its Directory catalogue arm also slightly negative. In March, Next’s chief executive, Lord Wolfson, predicted difficult conditions in the clothing sector, likening the outlook to 2008, a time when the country was mired in the financial crisis.
