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Childrenswear fade in retail sales - Verdict
08 Mar '06
4 min read
While this story is speculation we believe that Philip Green would find it hard to offload Bhs at the moment. He has the business working at its optimum level of efficiency but has been unable to grow sales.
It is the last of the traditional mid market, big space chain stores – C&A and Littlewoods having both disappeared – and is being squeezed by a new breed of clothing retailers, the value operators such as Primark and Peacocks. Bhs does not match these operators on price and is trailing behind on product as well – which has resulted in extensive markdowns, particularly over Christmas. Continued markdowns will chip away at its two main attractions for investors, its operating margin and bottom line.
In addition there has been little investment in the stores – certainly not the kind of investment Primark for example has made on producing large, contemporary and very attractive high street stores.
When Bhs is positioned next to a Primark, as it is in Watford for instance, there is just no contest. Arcadia, his other business, is doing well because it has strong retail brands run by dedicated brand managers who each have a clear vision of their brand's values and proposition.
Bhs does not have an equally strong proposition and confuses shoppers. Its homewares has improved and is a very attractive offer – but is diluted by the clothing ranges and therefore does not have strong destination appeal.
Its dedicated home stores could build up its authority in this category, but it still has the problem of what to do with its clothing offer. The incorporation of the Tammy brand into childrenswear is also weakened by the overall proposition – few fashion savvy tweenagers would want not to shop in a Bhs store.
Therefore it is not just the retail environment that is impacting the business. Bhs needs to come up with a good reason for its existence and an attractive proposition that will make customers shop there.
Tweaking around the edges will not solve the problem of long term survival. It demands further investment which, in a time of low consumer demand and rising costs, is not such an attractive option unless there is a winning formula. Philip Green said he took his eye off the ball during his bid for M&S and let the business slip – but that was nearly two years ago now – he cannot afford to let it slip further.
It is the last of the traditional mid market, big space chain stores – C&A and Littlewoods having both disappeared – and is being squeezed by a new breed of clothing retailers, the value operators such as Primark and Peacocks. Bhs does not match these operators on price and is trailing behind on product as well – which has resulted in extensive markdowns, particularly over Christmas. Continued markdowns will chip away at its two main attractions for investors, its operating margin and bottom line.
In addition there has been little investment in the stores – certainly not the kind of investment Primark for example has made on producing large, contemporary and very attractive high street stores.
When Bhs is positioned next to a Primark, as it is in Watford for instance, there is just no contest. Arcadia, his other business, is doing well because it has strong retail brands run by dedicated brand managers who each have a clear vision of their brand's values and proposition.
Bhs does not have an equally strong proposition and confuses shoppers. Its homewares has improved and is a very attractive offer – but is diluted by the clothing ranges and therefore does not have strong destination appeal.
Its dedicated home stores could build up its authority in this category, but it still has the problem of what to do with its clothing offer. The incorporation of the Tammy brand into childrenswear is also weakened by the overall proposition – few fashion savvy tweenagers would want not to shop in a Bhs store.
Therefore it is not just the retail environment that is impacting the business. Bhs needs to come up with a good reason for its existence and an attractive proposition that will make customers shop there.
Tweaking around the edges will not solve the problem of long term survival. It demands further investment which, in a time of low consumer demand and rising costs, is not such an attractive option unless there is a winning formula. Philip Green said he took his eye off the ball during his bid for M&S and let the business slip – but that was nearly two years ago now – he cannot afford to let it slip further.
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