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Toys R Us store
‘The experience should have been magical; the reality was a soulless shed’ Photograph: Jack Taylor/Getty Images
‘The experience should have been magical; the reality was a soulless shed’ Photograph: Jack Taylor/Getty Images

5,500 jobs at risk as Toys R Us and Maplin face administration

This article is more than 6 years old

Top names from British high street teeter on brink as retailers struggle to adapt to shift in shopping habits

More than 5,500 retail jobs are at risk as two of the high street’s best known names teeter on the edge of collapse.

Toys R Us, with more than 3,000 staff, is set to go into administration in the next 24 hours, and 11th-hour rescue talks designed to shore up Maplin are also said to have broken down, meaning that the 200-store electronics chain also faces imminent bankruptcy.

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The loss-making Toys R Us retailer has been hunting for a buyer for several weeks, but the formal appointment of administrators is now imminent. The 105-store chain is a subsidiary of the eponymous US company, which filed for bankruptcy protection in the US and Canada last year after amassing $5bn (£3.7bn) of debt.

The brand, which runs large out-of-town stores, has struggled to keep pace with shifts in shopping habits as Britons increasingly buy toys online or in supermarket aisles.

Maplin, which is owned by the private equity investor Rutland Partners, has been struggling to find new funding since last autumn when it lost its credit insurers, which means that suppliers demand cash payment for stock upfront rather than one to three months after delivery.

Maplin sales fell by 7% over the Christmas period, partly because the shops were short of stock as a result of its credit insurance problem.

Maplin’s problems have reached a critical point because the stores faces a £15m VAT bill, which is due for payment by 1 March. The chain has been in talks with Philip Day, a billionaire retailer whose business interests span Edinburgh Woollen Mill, Peacocks, Jaeger and Austin Reed, but the talks are understood to have broken down on Tuesday afternoon.

Many high street names are finding trade tough. House of Fraser is asking its landlords to cut its rent bills, and Debenhams and New Look are trying to cut costs by shutting stores. The major supermarkets have recently announced thousands of job cuts.

Large volumes of trade have switched online – 20% of fashion is now bought on the internet – and a huge shift is under way in the way households spend their time and money. Leisure, travel, eating out, eating in and technology are all taking time and cash that would once have gone to shops.

The specialist beds retailer Warren Evans went into administration earlier this month and the fashion chain East collapsed at the end of January. The furniture chain Multiyork and the shoe retailer Shoon both folded in the weeks before Christmas.

Retail experts said Toys R Us’s problems were down to a lack of investment in its stores and website. “It would be easy to blame Amazon, but the reality is that Toys R Us has been a victim of complacency,” said Natalie Berg, an analyst at NBK Retail . “As a specialist retailer, the Toys R Us experience should have been a magical one with in-store events, dedicated play areas and product demonstrations. The reality was a soulless shed.”

The company’s UK chain won a stay of execution in December when landlords agreed to take back the keys to a quarter of its shops and accepted less rent for those that stayed open, but after weak trading in the new year its US owner cut it adrift. The retailer had been trying to drum up a buyer before the end of February when several payments were due.

“The combination of rising prices and subdued demand is putting considerable pressure on retailers and particularly exposing those with underlying issues,” said Berg. “Burdened by debt, Toys R Us has simply been unable to adapt to a changing retail environment.”

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