The once incredibly popular Toys R Us retail chain has officially announced it has entered administration, putting over 3,000 jobs at risk. Electronics specialist Maplin made a similar announcement on the same day.
The Toys R Us management team reportedly met with representatives from the Pension Protection Fund (PPF) to notify them of the plans to enter administration at the end of February. The decision was not entirely unexpected and came after no buyer was found ahead of several pending business expenses, including a £15m VAT bill.
There are currently more than 100 Toys R Us stores trading in the U.K., with more across Europe. The British operation was known to be precarious after a deal with creditors was announced to allow the firm to continue trading during the critical Christmas period. It had already been announced this required both the closure of a number of stores and deals with landlords to cut rents.
The UK chain, and its American sister operation, have felt the impact of customers looking elsewhere for the big-name brands stocked on its shelves. In the face of a biting financial climate, consumers have shown little faith in the company’s out of town megastores. Instead, they have taken their purchasing power online or to the growing toy aisles of major supermarkets. supermarkets. Toys R Us’ most recent accounts showed an operating loss of £500,000 on sales of £418m.
The toy and games retailer is not alone in feeling this pinch. Online sales across the retail sector have been topping growth in in-store revenues for some time. Internet transactions were up 18% in 2018, and by 27% over the previous two years, says analysis from the accountancy firm, BDO. Their figures also showed successive drops in sales and profits from physical stores over the same period.
Maplin’s management team said there were a number of factors to their current situation, including the impact of Brexit on the pound and their loss of credit insurance which affected their supply chain.
Experienced financial services firm, PriceWaterhouseCoopers (PWC) are looking after the company’s administration plans and hope for the best possible outcome for the chain’s staff, shareholders, landlords and other relevant parties.
Zelf Hussain for PWC said the first stage would be to engage with parties interested in taking on the business, either in whole or in part. The firm would continue to trade during this time.
The electronics chain has 2,500 UK staff across 200 stores, which will remain open for the time being. All staff had been paid their salaries and could expect that to continue for as long as the company remained in administration.
The problem for these big-box retailers is the low-price and ease of using internet retailers to purchase items and deliver them to your door. Their old model of pile-them-high and sell them not so cheap has struggled in a punitive retail environment of high rents and low footfall. Experts suggest that the brand didn’t do enough to adapt to these new trends. Toys R Us managers should have quietly spent time with popular stores like Lego, and understanding what the voices inspiring our kids on YouTube were saying about the new hottest thing. In fact, they started trialling new formats too late and couldn’t build a reputation for competitive prices. A trip to Toys R Us lacked drama, with stores that were too big and unwelcoming.
Children’s preferences have also changed. New and interactive technology now top their wish lists, meaning virtual reality headsets and drones are much more popular than Toys R Us staples like bikes and puzzles.