Moorfields and PwC appointed administrators, as Toys R Us and Maplin collapse

05 March 2018 7 min. read

UK high-street chains Toys R Us and Maplin have both collapsed into administration, citing growing debt and uncertainty relating to Brexit as key reasons behind their falls from grace. Toys R Us have hired administrators from Moorfields, while Maplin will now work with PwC, as the duo attempt to avoid wide-spread redundancies and store closures.

Since the global financial crisis, British high-streets have taken a consistent battering – with retailers Woolworths, media stores Zaavi and HMV, and electrical goods provider Comet among the formerly high-profile casualties of the economic turbulence that began with 2007’s infamous credit crunch. Major brands have been vacating bricks-and-mortar presences for years since, a process accelerated by the boom in disruptive ecommerce platforms over the past decade.

Last year, analysis revealed that the number of stores closing in the UK had fallen to 14 a day – the lowest level since before 2010, the first half of which saw record volumes closures hit 3,361. However, 2018 has seen the UK retail sector stung by several high-profile liquidations.

Moorfields and PwC appointed administrators, as Toys R Us and Maplin collapse

While Poundland owner Steinhoff seems, for now, to have averted collapse, two companies have fallen into administration at the end of February, amid a trend which some experts are comparing to the retail crash of 2008. The UK retail sector has been reported to be facing increasing uncertainty relating to Brexit. However, the stagnation of wages in real terms, coupled with rising consumer debt, could also have a major impact on consumer’s spending power in the sector, in a re-run of the 2007 credit crunch.

Feeding into this mounting concern, in what some worry is a sign of things to come, after a prolonged period of struggling for solvency, Toys R Us UK has collapsed, which was followed by similar news for fellow high-street chain, Maplin. Both companies have appointed professional services firms to administrate their winding down.

Toys R Us appoint Moorfields

Toys R Us had already filed for bankruptcy protection in the US, in what experts at the time described as one of the largest ever Chapter 11 filings by a speciality retailer. In spite of this, in the UK, many of the group’s small stores proved relatively resilient. However, the group was eventually dragged under by its larger, warehouse-style outlets, opened in the 1980s and 1990s, which had become increasingly expensive to run, placing a heavy burden on the balance sheet.

Further adding to its debt woes, the chain was taken private in 2005 by a consortium of buyout funds that included Bain Capital, KKR and Vornado Realty Trust. The private equity owners loaded the company up with $5 billion of long term loans, which forced the chain to spend more than $250 million on debt service alone – something analysts say may have made it harder to invest in fresher-looking stores. Compounding the situation, Toys R Us had been battling a challenging retail environment for months as consumers have changed their shopping habits, increasingly favouring online purchases, from the likes of Amazon, over visits to bricks and mortar outlets.

Toys R Us store

Approaching the end, the embattled group had survived the Christmas period after a last minute Company Voluntary Arrangement (CVA), which aimed to trigger the closure of a quarter of its 105 shops, was agreed – but a sudden £15 million VAT demand from the UK Tax Office due before the end of February ultimately scuppered the deal. Now, Toys R Us UK has entered administration, putting 3,200 jobs at risk, while facing an estimated funding shortfall of at least £25 million in its pension scheme.

As it became increasingly apparent that Toys R Us would not survive in its present form, the Pension Protection Fund advised the company that Alvarez & Marsal, which had overseen the CVA deal, should not be appointed as administrators. It was understood that the organisation, which is Toys R Us’ biggest unsecured creditor, would have preferred to see such a project handed to Big Four firm PwC instead. Eventually, however, administrator Moorfields has been appointed to conduct what it is describing as an orderly wind-down of the company's store portfolio.

Simon Thomas, joint administrator, and a Partner at Moorfields, said that all stores will remain open until further notice and stock will be subject to clearance and special promotions.

"We're encouraging customers to redeem their gift cards and vouchers as soon as possible,” he added, stating that Moorfields will, “make every effort to secure a buyer.”

Maplin appoints PwC

Shortly after Toys R Us announced its lapse into administration, the UK high-street was further hit by the news that Maplin had also collapsed. The group was previously one of the UK's biggest electronics retailers, boasting an annual turnover of £235.8 million, and operating more than 217 stores and over 2,300 staff across the UK and Ireland, with head offices in London and Rotherham.

The group began life as a mail-order business in 1972, providing electronic components to hobbyists, before opening its first shop in Westcliff-on-Sea in Essex in 1976. After changing hands several times since, the chain has been owned by Rutland Partners since 2014.

The business had faced the slump in the pound after the Brexit vote, weak consumer confidence and a withdrawal of credit insurance, all of which made it “impossible” to raise capital, according to boss Graham Harris.

Maplin will continue to trade through the liquidation process, after talks with buyers failed to secure a sale. Harris added, "We believe passionately that Maplin has a place on the High Street and that our trust, credibility and expertise meets a customer need that is not supported elsewhere.”

Maplin store

The retailer will now work with administrator PwC, which stated it would "explore all opportunities to find a new owner", before reaffirming Harris’ commitment to keep stores open, and avert redundancies for the moment. Any outstanding customer orders will also be delivered, while Maplin gift cards will continue to be accepted in stores for the present.

Zelf Hussain, joint administrator and PwC partner, said, "The challenging conditions in the UK retail sector are well documented.”

"Like many other retailers, Maplin has been hit hard by a slowdown in consumer spending and more expensive imports as the pound has weakened," he said, before adding, "Staff have been paid their February wages and will continue to be paid for future work while the company is in administration."

Potential buyers had included Edinburgh Woollen Mill, the clothing company that owns Peacocks, Country Casuals and several other retailers, although talks are understood to have broken down.