Toys R Us winds down in UK
• Move puts up to 3,200 jobs at risk and comes as another retailer, Maplin, goes into administration amid fallout from Brexit vote
The British arm of troubled retailer Toy R Us was winding down its activities, administrators said on Wednesday.
The British arm of troubled retailer Toy R Us is winding down its activities, administrators said on Wednesday as the US firm faces pressure from rival stores and Amazon.
The announcement puts up to 3,200 jobs at risk and comes as the British electricals retailer Maplin joined Toys R Us UK on Wednesday in falling into administration, the process whereby a troubled company seeks independent financial advice regarding its future.
Maplin operates out of 217 stores across Britain and Ireland, employing about 2,500 staff.
The collapse of some major retailers in the UK comes as Brexit uncertainty appears to be affecting the country’s economic growth, according to recent official figures.
“The challenging conditions in the UK retail sector are well documented,” said Zelf Hussain at PwC, which is acting as administrators for Maplin.
“Like many other retailers, Maplin has been hit hard by a slowdown in consumer spending and more expensive imports as the pound has weakened” following Britain’s vote in favour of leaving the EU.
Hussain added that the administrators would “engage with parties who may be inter- ested in acquiring all or part of the company”.
The UK division of Toys R Us narrowly avoided entering administration in December after a key creditor embraced its plan to begin shutting stores and plug its pensions deficit.
It was agreed that at least 26 of the 105 shops in Britain would close in early 2018. But the firm was nevertheless forced to enter insolvency proceedings.
Court-appointed administrators Moorfields said: “Following the failure to attract a buyer for the business … administrators are conducting an orderly winddown of the company’s store portfolio.” While the Toys R Us announcement “is likely to affect many … staff, whether some or all of the stores will close remains to be decided”, Moorfields administrator Simon Thomas said.
As of late 2017, Toys R Us in the UK employed more than 3,000 staff across more than 100 sites, mostly in its warehouse-style stores.
“All is not well on UK high streets,” said Richard Lim, CE of Retail Economics.
Toys R Us had been “burdened with too many stores and failed to deliver a retail ‘experience’ good enough to stand out from their competitors”, Lim said.
Toys R Us filed for chapter 11 bankruptcy protection in a US court in September, which gives companies temporary protection from creditors while they try to renegotiate debts and reorganise to continue operations. The firm’s British branch has lost money for seven of the last eight years.
The cost of operating the group’s out-of-town stores, which were opened in the 1980s and 1990s, has become prohibitive in recent times.
“While the narrative about the sad demise of Toys R Us focuses on how it was killed by the internet, data shows that the rise of multichannel player Smyths caused even more damage than Amazon,” said Patrick O’Brien, retail research director at consultancy GlobalData.
“Without a deal in sight, more closures are imminent.
“But it won’t be Amazon that benefits the most.
“According to GlobalData’s How Britain Shops survey, frequent Toys R Us shoppers are more likely to shop at market leader Argos and Smyths,” O’Brien added.