PARIS – Less than a year after the splashy – and much criticized – debut of Shein within its doors, historic Paris department store BHV has filed for court protection and reorganization, as cash-flow difficulties threaten its turnaround plan.
The news, first reported by Le Figaro, comes after a change of hands in June.
Chief executive officer Karl-Stéphane Cottendin, who acquired the business with a recovery plan alongside three other executives just five months ago, said that the procedure was a strategic step intended to support the retailer’s restructuring and preserve jobs.
“Judicial reorganization is a technical framework: it is a strategic step in the restructuring plan, a considered decision that forms part of the life and recovery of the company. BHV is 170 years old; it has weathered many other storms, and it will weather this one,” Cottendin said in a statement.
“What this store lacks today is the cash flow it is owed,” he added.
The company said the store will remain open and its management team will continue to lead the recovery plan, as the crucial holiday season looms. Cottendin said that “every week counts,” arguing that the retailer has “everything it needs to succeed.”
The latest dispute centers on Canadian investment firm Brookfield, which acquired the BHV building in January from former owners Galeries Lafayette.
Cottendin maintains that the recovery plan depends partly on 37.5 million euros owed in compensation linked to the return of more than half the store’s premises to Brookfield, which were rumored to be slated to be converted into luxury apartments, but that payments have not been made.
However, Brookfield disputed the claim and said no compensation is currently owed to BHV, and that any compensation was conditional on the premises being returned in the required condition.
BHV said the owed funds had prevented it from carrying out planned investments such as stock replenishment, renovations and an overall commercial relaunch after waves of bad press and months of empty shelves.
Looting at the store’s ground floor during the unrest on Oct. 17 in central Paris had further strained its cash position, the company added.
The divergent positions have intensified tensions between the retailer and its landlord, leaving the funding of Cottendin’s recovery plan uncertain.
Management said the cash-flow squeeze had made it increasingly difficult to fund the turnaround while addressing existing liabilities. It expects the judicial reorganization process to provide a framework for dealing with pre-existing debts, enforce agreements with the landlord and attract investment, while allowing the company to present a continuation plan to the court after an observation period.
He vowed to continue “this fight to revive the store” under the protection of the courts, bolstered by fundamentals he deemed solid and a defined recovery plan that includes “a commercial strategy, an offering, and teams working tirelessly to make this project succeed.”
The filing follows a turbulent year for the department store.
Under former owners Groupe Société des Grands Magasins (SGM), BHV sparked controversy last November by opening the first permanent physical store of Chinese ultra-fast-fashion retailer Shein in France, prompting protests and the departure of several brands, as well as the end of its partnership with Galeries Lafayette Group.
The embattled retailer was sold in June to its management team, who subsequently ended the partnership with Shein, which will fully exit the premises by the end of December.
Since taking over, the new owners have sought to reposition BHV as a locale for everyday shopping for the neighborhood around its historical location, with a stronger focus on homewares and the retailer’s traditional strengths.
Its ground floor has reopened and around 40 brands have returned. More were expected by year-end, with a Grand Marché du Marais foodcourt also due to move in, while pop-up stores are scheduled to open from November, according to the company.
The filing comes days before a separate hearing scheduled for Oct. 30 at the Paris Commercial Court, following concerns raised by the labor inspectorate about the company’s solvency. BHV management has disputed those concerns and says it intends to present a continuation plan.
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