Sir Philip Green’s plans to bring about a revival at Bhs suffered a blow yesterday when Tony Brown, retail director of the high street chain, resigned to lead Beales, the Dorset-based department store.

The billionaire entrepreneur, who also owns Arcadia, the group that includes Topshop and Dorothy Perkins, has been seeking a new chief executive for Bhs for several months and the departure of Mr Brown weakens Sir Philip’s top team at an awkward time.

Sir Philip took direct control of the chain himself two years ago after sales and profits slumped. Last week he reported that Bhs had bounced back from a dreadful 2005 to lift operating profits by 3 per cent in the year to March 2007.

Sir Philip said: “Obviously I’m disappointed that he’s going as Tony has done a good job for us, but he wants to see if he can run a business and he feels it is a small enough company to have a go.”

Mr Brown, 50, has been retail director – with responsibility for store operations throughout the UK and Ireland – since 2001. Industry observers said it was odd that Mr Brown, previously operations director of Somerfield and a regional managing director of Asda, had chosen to join a much smaller retailer.

Mr Brown will replace Allan Allkins, who is retiring as chief executive of Beales next April. However, Sir Philip pointed out that Mr Brown was unlikely to join Beales in April as planned because he had a 12-month contract with Bhs and would not be released until a replacement had been found.

Sir Philip is frequently rumoured to want to sell Bhs, which has struggled to increase sales levels under his stewardship, and has held talks with Allan Leighton, the Royal Mail chairman. Baugur, the Icelandic retail group, and Asda, the Wal-Mart-owned supermarket, are also thought to have held talks with Mr Green over a buyout.

However, Sir Philip insists that he wants to keep the business for the long term and has pledged to spend £100 million revamping the 185-store Bhs chain in an attempt to fight increasing competition from rivals such as Marks & Spencer, Primark and Debenhams. Last week Sir Philip said that he had hired Simon Pickering, the former Gap buying boss, to be Bhs’s menswear director as he builds a team to revive the business.

A number of other senior directors at the retail firm have departed in the past few years. Neil Hendy, the Bhs design director, left the business to join Marks & Spencer in April last year, and Beverley Churchill, the marketing director, left in October 2006 after only a year in the job. Sir Philip stepped in to take over womenswear buying decisions from Stephanie Chen, who left the buying director role in October 2005.

Mike Killingley, the chairman of Beales, said that Mr Brown would: “bring a wealth of valuable retail and operational experience to the business”. Beales, which has a turnover of only £107 million, has struggled to cope against increasing competition from larger department store groups.

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