Toys R Us goes bust after losing battle against web shopping
TOYS R US went bust yesterday after struggling to fight off the threat of online shopping.
The collapse of the chain, which has been a mainstay of high streets and retail parks since the 1980s, put 3,000 jobs at risk.
Its 105 stores in the UK are expected to close in less than 12 weeks.
The retailer, Britain’s biggest toy shop, fell out of fashion in recent years as its warehouse- style stores became less popular and customers chose to go online instead.
Toys R Us also failed to compete with rivals such as Smyths and The Entertainer, which continue to attract shoppers.
The toy company was rescued from the brink weeks before Christmas after it agreed to plug its £18.4million pension deficit, allowing it to continue trading through the festive season before closing a quarter of its least profitable stores.
But disappointing Christmas sales left it vulnerable and it has failed to secure a lifeline.
Toys R Us’s parent company in the US is also struggling. Last year it filed for bankruptcy protection and has closed 182 stores, affecting 4,500 employees. Last week it revealed plans to close a further 200 outlets to avoid total collapse.
The lifeboat Pension Protection Fund will have to plug a £37million black hole in the company’s retirement scheme for Toys R Us staff.
The retailer was forced to call in administrators after it failed to attract a buyer and stump up £15million for a VAT bill.
Stores are expected to continue trading as normal for the time being, but its website has closed to new orders.
The company said it will continue to accept payments using gift cards and vouchers, although customers have been advised to use these as soon as possible. It is no longer accepting returns for refunds.
Julie Palmer, of law firm Begbies Traynor, said Toys R Us had been hit by a ‘perfect storm’ of rising wage pressures, online shopping and mounting inflation. She added: ‘It is clear only the strongest retail offers will survive one of the toughest trading environments the retail sector has seen for some time.’
It comes after Toys R Us promised to give its top executives £ 10.5million worth of bonuses if they met Christmas sales targets.
Questions have also been raised over a £584.5million loan funnelled into an offshore tax haven. Tax experts called for a probe, accusing the retailer of secrecy and tax dodging.
On top of its outstanding £15million tax bill, Toys R Us is estimated to owe £238million to its 1,700 creditors, including £74million owed to its pension fund for employees. Lego and Hasbro are owed £5million each, Mattel more than £3.5million and Vtech over £700,000.
Councils are owed millions in business rates for shops and hundreds of smaller suppliers are awaiting payments.
Simon Thomas, of Moorfields, which is conducting the winddown, said: ‘All stores remain open until further notice and stock will be subject to clearance and special promotions.
‘We will make every effort to secure a buyer for all or part of the business … While this process is likely to affect many Toys R Us staff, whether some or all of the stores will close remains to be decided.’