Toys 'R' Us 'winds down' as UK retailers hit hard times

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February 28, 2018 2:25 PM

The collapse of certain major retailers in the UK comes as Brexit uncertainty appears to be impacting the country's economic growth according to recent official data.

The British arm of troubled retailer ToysRUs is winding down its activities, administrators said Wednesday as the US firm faces pressure from rival stores and online giant Amazon.

Wednesday's announcement puts up to 3,200 jobs at risk and comes as British electricals retailer Maplin joined Toys'R'Us UK in falling Wednesday 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 close to 2,500 staff.

"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 exiting the European Union.

Hussain added that the administrators will "engage with parties who may be interested in acquiring all or part of the company".

The British 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 ahead of the New Year 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 in a statement: "Following the failure to attract a buyer for the business... administrators are conducting an orderly wind-down 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", said Moorfields administrator Simon Thomas.

As of late last year, Toys'R'Us in the UK employed more than 3,000 staff across more than 100 mostly warehouse-style stores.

"All is not well on UK (shopping) high streets," said Richard Lim, chief executive of Retail Economics.

Toys'R'US has been "burdened with too many stores and failed to deliver a retail 'experience' good enough to stand out from their competitors".

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 their 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, 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," he added.

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