February 28, 2018 / 12:02 PM / a year ago

Tough UK retail market claims high street stores Toys R Us, Maplin

LONDON (Reuters) - Tough trading conditions sank two high-profile retailers on Wednesday, with the collapse of Toys R Us UK and electronics chain Maplin sending ripples across the sector.

FILE PHOTO: A Toys "R" Us store is seen, in Hayes, Britain December 2, 2017. REUTERS/Peter Nicholls/File Photo

The administration of the two retailers, a form of creditor protection, highlights the grim state of the UK high street, which has suffered from weak consumer sentiment, the growth of online sales and currency swings due to Britain’s vote to leave the European Union.

The two collapses put over 5,000 jobs at risk, and Maplin blamed the adverse economic environment.

“The business has worked hard over recent months to mitigate a combination of impacts from sterling devaluation post Brexit, a weak consumer environment and the withdrawal of credit insurance,” Maplin CEO Graham Harris said in a statement, adding new capital had been “impossible to raise” in such market conditions.

“These macro factors have been the principal challenge,” he added.

The two administrations unnerved investors in the sector. Shares in Mothercare (MTC.L), which competes with Babies R Us, slumped around 9 percent to an all-time low.

Hedge funds are also betting against some retailers such as Debenhams DEB.L and Pets At Home (PETSP.L) as the sector struggles.

Maplin and Toys R Us UK stores will stay open for now while administrators determine their future.

The toy retailer, which also operates as Babies R Us, has struggled in Britain in recent years as shoppers increasingly prefer to spend online rather than visit its large out-of-town stores. Toys R Us administrator Simon Thomas said newer, smaller shops had outperformed the older, warehouse-style stores.

Rebecca Long-Bailey, the opposition Labour party’s business spokeswoman, said the government should “urgently address problems across the retail sector.”

“It’s devastating that over 5,500 High Street jobs risk being lost. This latest shock in the retail sector continues a worrying trend for our shopping streets and centers,” she said.

A government spokesman said it was a “worrying” time for workers at the businesses.

Other brands are facing difficulties. Sky News reported that restaurant chain Prezzo plans to close up to a third of its 300 outlets, and that department store House of Fraser had asked landlords for rent reductions.

Hamburger restaurant chain Byron said in January it had agreed to restructure through a company voluntary arrangement with creditors.

Reporting by Alistair Smout; Additional reporting by Alasdair Pal; Editing by Stephen Addison

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