Beales, one of the UK’s oldest department store chains, is in talks with two potential buyers to save it from a collapse that would put more than 1,000 jobs at risk.
Tony Brown, Beales’ chief executive and owner, said that the company was speaking to a venture capital firm and a rival retailer about buying the business, and would either confirm a sale by the end of this week or look at alternatives.
If an agreement cannot be reached, he added, administration “would be an option for us”. On Thursday last week, Beales filed a notice of intent to appoint an administrator, giving it 10 days’ protection from creditors.
Mr Brown would not reveal the identity of either party. Mike Ashley, the controversial founder and chief executive of Sports Direct, has previously expressed interest in the chain but has more recently spoken of the challenges of turning round House of Fraser, which he acquired in August 2018.
Sports Direct did not immediately respond to a request for comment.
Mr Brown said the “lunacy” of business rates had compounded the trading difficulties that afflicted all retailers over the festive period. In some locations, he said, the company was paying more than three times its rent in rates.
Beales reported a pre-tax loss of £3.2m for the year to the end of March 2019, up from £1.5m the year before. Sales declined slightly from £48.7m to £48.3m.
The group first began trading in 1881 in Bournemouth where its headquarters remains. Beales has 21 stores spread across middle-sized UK towns including Bedford, Mansfield, Tonbridge and Skegness, as well as one in Scotland.
In 2018, two years after it reduced rents on 11 of its stores through a company voluntary arrangement, Mr Brown led a management buyout of Beales backed by restructuring specialist Hilco.
In December last year, Beales announced that it was appointing KPMG to oversee a sale of the company while it continued “to acclimatise to the ever-changing landscape and challenges of the retail market”.
Both the British Retail Consortium and the Centre for Retail Research have declared that 2019 was one of the worst years for UK retail in the past 25 years. After stagnant Christmas sales, many retailers have struggled to meet costs.
Mothercare, which first brought in KPMG to advise on restructuring in October, closed its final high street stores on Sunday. Debenhams also shut another six out of the 50 underperforming stores that it has earmarked for closure after being bought by its lenders out of a pre-pack administration in April last year.
“Beales have been on the edge for an awfully long time and it’s no surprise in this market,” said Richard Hyman, an independent retail analyst. “We are going to see much more of this as the year unfolds.”
Conditions are especially tough for smaller, regional department store operators, which often lack the scale and financial strength of entities such as John Lewis, or a deep-pocketed backer such as Sports Direct.
In 2019, Glasgow-based Watt Brothers went into administration in October. Even Fenwick, the Newcastle-based group where British Retail Consortium chairman Richard Pennycook is chair, reported a £44m pre-tax loss in the year to January 25 2019.
According to business rates consultancy Altus, a third of department stores on English and Welsh rating lists in 2010 have now disappeared.
Mr Hyman warned that agreeing a sale of Beales would be difficult as the stock would be its only asset of real value and much of that would likely be held by suppliers that owned concessions in its stores.
“This is going to be about buying the business for a pence in the pound and selling all of the stock,” he said.
US bank Wells Fargo has a charge of up to £17m over much of the business and assets of the company, which also has a deficit on one of its defined benefit pension schemes.
Beales had been trying to increase its online sales and focus its business on homeware, small domestic appliances and accessories such as shoes which, it said in December, “are all showing significant sales improvements”.