Toys R Us, Poundworld… The retail chains the British high street waved goodbye to in 2018

Toys R Us, Poundworld… The retail chains the British high street waved goodbye to in 2018

Retail has climbed the news agenda this year, with experts dubbing 2018 the ‘worst year for the High Street since the recession’.  Around 93,000 retail jobs have been lost as around 4,000 stores closed their doors for the final time.   Struggling companies, ranging from Homebase to Mothercare, launched Company Voluntary Arrangements (CVA) – an emergency restructuring method used


Retail has climbed the news agenda this year, with experts dubbing 2018 the ‘worst year for the High Street since the recession’. 

Around 93,000 retail jobs have been lost as around 4,000 stores closed their doors for the final time.  

Struggling companies, ranging from Homebase to Mothercare, launched Company Voluntary Arrangements (CVA) – an emergency restructuring method used to rapidly get out of leases on under-performing stores and slash the rent bill. 

According to the British Retail Consortium (BRC), 93,000 fewer people now work in retail

According to the British Retail Consortium (BRC), 93,000 fewer people now work in retail

In fact, this rescue method became so prevalent in 2018 it was described by some as ‘the year of the CVA’ – much to the despair of retail landlords. 

The ongoing switch to internet shopping has had a large part to play in all this. 

According to official statistics, in November more than 20p in every pound was spent online – a new record. 

That contributed of course to falling footfall in key shopping destinations such as High streets.

Meanwhile, uncertainty around Brexit has weighed on consumer sentiment, prompting some to tighten the purse strings, and delay moving house or large projects.  

According to GfK, consumer confidence has been in negative territory all year and since 2016

According to GfK, consumer confidence has been in negative territory all year and since 2016

According to GfK, consumer confidence has been in negative territory all year and since 2016

Amid all this, a war over the so-called ‘antiquated’ business rates system waged, with traditional retailers calling for the Government to create more of a level playing field with high-flying, low-cost online firms.

There’s an element of Darwinism at play here – as a lethal cocktail of factors conspired to make life difficult for once-loved retail giants, only the fittest stood a chance at survival. 

Amid unprecedented and rapid change, the chasm between the industry’s winners and losers widened, with some tipping over the brink and collapsing into administration. 

Here we look back over the firms that have been forced to shut up shop this year – in chronological order – and what went wrong. 

Toys R Us administrators started closing its 100 stores in late February this year

Toys R Us administrators started closing its 100 stores in late February this year

Toys R Us administrators started closing its 100 stores in late February this year

Toys R Us 

The first big retail firm to go bust this year was the once-beloved Toys R Us.  

With owners in the US and a heavy debt burden to manage, the UK business was guilty of failing to adapt at the same pace of its rivals. 

The former go-to place for every toy under one roof was well and truly usurped by the internet – where there is now a world of toys at children’s fingertips, often at much lower prices. 

Toys R Us' big shed stores on retail parks failed to allure parents or children

Toys R Us' big shed stores on retail parks failed to allure parents or children

Toys R Us’ big shed stores on retail parks failed to allure parents or children

Under-investment and poor management meant that its 105 UK sheds lacked magic, giving time-poor parents another reason to migrate online. 

Meanwhile, bricks-and-mortar rivals Smyths Toys and The Entertainer proved more proficient at capturing internet-proof pocket-money spend. 

At the end of 2017, Toys R Us struck a deal with the pensions lifeboat and managed to get the green light for a CVA to close some of its worst stores. 

But it was merely kicking the can further down the road. On February 28, 2018, the firm fell into the hands of administrators when it couldn’t find the funds to pay a £15million VAT bill. 

Around 3,000 people lost their jobs and, nearly a year later, some of its stores remain empty. 

Maplin

On the self-same fatal day in February, 42-year old electronics chain Maplin ran out of juice. 

It suffered from many of the same issues as Toys R Us, with online firms – namely Amazon – selling many of the same gizmos at a lower price and gobbling up market share. 

Maplin did attempt to reposition itself as the Smart Home specialist and ploughed investment into its stores, but it was too little too late.   

Amateur drones were often best-sellers for Maplin in its final few years of trading

Amateur drones were often best-sellers for Maplin in its final few years of trading

Amateur drones were often best-sellers for Maplin in its final few years of trading

The nail in the coffin was the withdrawal of credit insurance from firms that were nervous about the firm’s future. This meant some suppliers wouldn’t send stock and Maplin went into the critical Christmas period last year without may key products. 

The sharp decline in sales that followed triggered Maplin’s private equity owners – Rutland Partners – to seek ‘fresh investment’.  

When it failed to secure a solvent sale for the business, it conceded, putting the jobs of 2,500 employees at risk. All its stores ceased trading in June this year. 

Conviviality 

Little more than a month later, on April 5, wines retailer Conviviality hit the buffers – taking another 2,000 retail jobs with it. 

It was a demise that took everyone by surprise – not least of all the firm’s shareholders – because the FTSE-listed company hadn’t appeared to have been in any sort of trouble.  

Still, the buoyant owner of Bargain Booze and Wine Rack, which also supplied more than 25,000 restaurants and bars, went from hero to zero in a matter of weeks. 

The first sign of trouble was a profit warning just a few weeks earlier, followed swiftly by the apparent discovery of an unpaid £30million tax bill. 

Fallen Conviviality owned around 800 retail stores including Bargain Booze and Wine Rack

Fallen Conviviality owned around 800 retail stores including Bargain Booze and Wine Rack

Fallen Conviviality owned around 800 retail stores including Bargain Booze and Wine Rack

Chief executive Diana Hunter, who held the reins since the firm’s stock market float in 2013, fell on her sword as the accounting issues emerged.

The company placed its shares on hold and urgently scrabbled to raise £125million to rescue the business. 

But its efforts failed and the company flopped in administration. 

There’s fresh life for its 800-store retail arm, however, which was quickly seized upon by wholesaler Bestway in a deal that valued it at a meagre £7million.   

Conviviality’s story has some similarities to that of Patisserie Holdings , the owner of Patisserie Valerie. 

Although the cake chain has now secured the funds it needs to get back on track, an accounting irregularity earlier this year pushed it to the brink. Its shares are still on hold. 

Calvetron Brands – Jacques vert owner

Next up was a brand that went into administration twice in the space of a year. 

In May 2018, Calvetron Brands – the fashion group behind Jacques Vert Precis, Windsmoor, Eastex, and Dash – called in the administrators, putting around 1,000 jobs at risk.  

The collapse was its second after first going bust in June 2017, and impacted 300 store concessions in chains like Debenhams and House of Fraser.    

Poundworld struggled to manage currency fluctuations and falling footfall

Poundworld struggled to manage currency fluctuations and falling footfall

Poundworld struggled to manage currency fluctuations and falling footfall

Poundworld 

Despite the so-called march of the discounters and growth of the value sector, Poundworld was the next company to hit the bucket. 

The Wakefield-based retailer sunk into administration in June, impacting 5,100 jobs as it slowly shuttered all 355 of its shops. 

‘Being a value retailer alone is not a passport for success in this market,’ independent retail analyst Richard Hyman told This is Money. 

A range of issues took the pound store under, including the sunken value of sterling in the wake of the Brexit vote. 

Poundworld’s single price point model meant that the company was particularly vulnerable to the currency’s wilt and the increased sourcing costs that followed. 

It could hardly start selling everything at £1.10. 

Poundworld also suffered from declining shopper numbers in some key locations. As most value players don’t operate online, they are reliant on this passing trade to make ends meet. 

And Hyman says ‘Poundworld was not well managed’ either, meaning it hit the brick wall of the most unforgiving retail market we’ve seen.  

House of Fraser sunk into administration  this year before being bought by Sports Direct

House of Fraser sunk into administration  this year before being bought by Sports Direct

House of Fraser sunk into administration this year before being bought by Sports Direct

House of Fraser 

Its not entirely true to say that House of Fraser has disappeared from the UK high street, because it hasn’t. But it did slide into administration, if only for an hour or so, in August this year. 

The 169-year-old chain, previously owned by C.Banner, which also owns Hamley’s, attempted to mount a CVA to close half its stores, but it crumbled under the weight of its debt in August. 

However, it was immediately snapped up in a pre-pack deal by High Street-hungry Mike Ashley. The Shop Direct founder and boss acquired the chain he already held a stake in for £90million.        

Mike Ashley's Sports Direct picked up House of Fraser and Evans Cycles this year

Mike Ashley's Sports Direct picked up House of Fraser and Evans Cycles this year

Mike Ashley’s Sports Direct picked up House of Fraser and Evans Cycles this year

So House of Fraser, which has around 17,000 employees, has been granted another shot at survival, as Ashley pledges to keep as many of its 59 stores open as possible and turn the fallen retailer into the ‘Harrods of the High Street’.

But the rescue hasn’t worked out well for everyone. 

Negotiations with landlords haven’t all gone Ashley’s way meaning that some of the department stores still face closure. 

What’s more, due to the nature of the acquisition, many suppliers and concession partners to House of Fraser, such as Ted Baker and Mulberry, were left out of pocket  to the tune of a collective £70million. 

Ashley also picked up struggling Evans Cycles in a pre-pack deal this year and plans to close around half of its stores. He is said to be eyeing up-for-sale Hamley’s too. 

Coast

Then, come October, fashion chain Coast collapsed as the troubles gripping the High Street intensified. 

All of its 24 stores were closed with immediate effect, leaving around 300 people out of work.   

However, rival Karen Millen agreed to buy the group’s brand, stock and website, saving another 600 staff.  

The deal raised eyebrows because Coast’s former owner Aurora Fashions is owned by Icelandic bank Kaupthing, which in turn owns Karen Millen.    

And more to come… 

This list is far from exhaustive. In 2018, there’s also been the collapse of small beds chain Warren Evans, for example, and just last week menswear firm Blue inc. Not to mention the independent firms that have shut up shop. 

But with political and economic uncertainty rolling into next year, and signs that this festive shopping period was not as bountiful as hoped, these are far from the last retail casualties we’ll see. 



Source link

Posts Carousel

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply