Toys R Us UK collapses

Toys R Us UK has been placed in administration after weeks of uncertainty.

The company’s demise follows the Chapter 11 bankruptcy of its US counterpart late last year and comes as negotiations are revealed over the sale of the Toys R Us Asian business to Hong Kong-based Fung Group, its joint venture partner in the region.

The Toys R Us UK administration places some 3000 jobs in jeopardy as administrator Moorfields looks for ways to rescue the debt-laden business, or break it up. The collapse came as the company reportedly could not pay a £15 million VAT bill due this week.

Patrick O’Brien, retail research director with retail analyst GlobalData, says the greatest damage to Toys R Us UK was caused not by Amazon, as commentators are suggesting, but by the rise of multichannel player Smyths.

“The internet did take away Toys R Us’ main unique selling point, which was having such a wide range (‘everything under one roof”), but its failure to react in terms of the shopping experience, pricing and its own website, which is a stark contrast to the more imaginative reaction of Smyths, and to a lesser extent The Entertainer,” said a GlobalData analyst

“Without a deal in sight, more store closures are imminent. But it won’t be Amazon that benefits the most. According to GlobalData’s How Britain Shops survey, frequent Toys R Us shoppers are more likely to shop at market leader Argos and Smyths,” the analyst said.

Toy market share of the current top four toy retailers in the UK, 2008-2017:Toys R Us share

* Source: GlobalData

Retail Gazette reported that just before Christmas the company secured a Company Voluntary Agreement allowing it to continue trading after its US counterpart filed for bankruptcy.

“However, poor trading over the Christmas period, largely driven by customers confusion over the health of the company following the deal, proved to be the final nail in the coffin,” it reported.

Joint administrator Simon Thomas said in a statement that the administrators will be conducting “an orderly wind-down of the store portfolio” during the coming weeks.

“All stores 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 said the administrators would be making “every effort” to find a buyer for all or part of the business.

Toys R Us UK had already shut down hundreds of its stores.

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