Toys R Us in the UK and electronics chain Maplin are on the brink of collapse, putting 5,500 jobs at risk.
The struggling retailers – two of the UK’s best known chains – are understood to have put administrators on standby after failing to secure a rescue deal.
Maplin – owned by Rutland Partners – had put the business up for sale, but talks with a potential buyer are understood to have broken down.
Toys R Us was also seeking a possible sale but has failed to secure a buyer.
Toys R Us staves off collapse after talks
Maplin in talks with potential buyers
The toy chain in the UK – whose US owner filed for bankruptcy protection last September – is facing an imminent deadline for a £15m VAT bill which it will not be able to pay without selling the business.
It had managed to stave off collapse in December by agreeing a rescue plan to allow it to restructure its operations, including the closure of at least 26 stores planned for this Spring.
But with poor sales continuing into the new year and the VAT bill looming, the only route left for the firm to continue trading was to find a buyer which is now understood to be unlikely.
Meanwhile, Maplin had been in talks with Edinburgh Woollen Mill, the clothing company that owns Peacocks, Country Casuals and several other retailers, over a possible sale, according to Sky News.
The move came after insurers cut credit cover last year because of Maplin’s falling profits.
The breakdown of the sale talks means that administration is now the most likely outcome for the firm.
High Street problems
Toys R Us and Maplin are the latest of a string of well known retailers to run into into financial problems in recent months.
Bed retailer Warren Evans is reported to be seeking a buyer to stave off administration, while clothing chain New Look and department store chain House of Fraser are seeking financial support from landlords and other creditors.
Meanwhile, Asian-inspired High Street fashion brand East and High Street furniture chains Feather & Black and Multiyork have all recently fallen into administration.
Toys R Us in the UK has blamed its problems on its “warehouse-style stores”.
It opened these in the 1980s and 1990s, but it said in December that they had become “too big and expensive to run in the current retail environment”.
The UK business is understood to have made a loss for seven out of the past eight years of trading.
Retail analyst Kate Hardcastle, from Insight With Passion, said both Toys R Us and Maplin had cut staffing to try to cut costs, which had led to poor service in the shops.
She said for Toys R Us the problem was particularly acute because it sold mainly branded goods.
“Therefore to succeed you need to offer some kind of differentiating factor – either a good discount or an experience that makes visiting the stores worthwhile.
“Toys R Us didn’t move with the times. It didn’t do discounts or retail theatre,” she says.
Maplin has 200 stores and 2,500 staff in the UK, while Toys R Us employs around 3,000 workers in its 106 stores.