Too big to fail?
There is no such thing when you look at the demise of some of Britain’s biggest household names on the high street which have included BHS, Woolworths and Jessops. The latest to join the critical list are electronics retailers Maplin and Toys R Us.
Electronics chain Maplin collapsed into insolvency on last month, making it the second retailer to succumb to a brutal winter for Britain’s consumer economy in the space of just over an hour. Graham Harris, who became chief executive only last month, said:
“I can confirm this morning that it has not been possible to secure a solvent sale of the business and as a result we now have no alternative but to enter into an administration process. During this process Maplin will continue to trade and remains open for business.”
The British arm of Toys R Us had already called in administrators after last-ditch efforts to find a buyer drew a blank.
Maplin was founded as a small mail order business in 1972. It was then sold by its management team and backer Graphite Capital until 2004, when private equity group Montagu bought it for £244m.
Montagu then sold Maplin for £85m to Rutland Partners, a special situations investment fund that also owns a stake in Pizza Hut UK, in 2014. Maplin employs 2,335 people and has an annual turnover of £235.8m, operating out of 217 stores across the UK.
Its administrators PwC said the group had gone into insolvency proceedings after it “experienced a decline in performance as a result of the softening of consumer demand in what has been a challenging retail environment”. A lower pound-to-dollar exchange rate had also adversely affected Maplin, PwC said, as it sources supplies in the US currency and sells its goods in sterling.
“Like many other retailers, Maplin has been hit hard by a slowdown in consumer spending and more expensive imports as the pound has weakened,” PwC partner Zeff Hussain said. He added: “We will continue to trade the business as normal whilst a buyer is sought. Staff have been paid their February wages and will continue to be paid for future work while the company is in administration."
The retail sector is suffering from difficult market conditions. With high street spending slowing due to loss in consumer confidence and businesses in certain sectors facing changes in the way we shop this is a trend which is likely to continue.
The insolvency and restructuring team at Turner Parkinson are increasingly involved in advising business owners facing these challenges and taking expert advice early enough is the key to achieving the best outcome.