Closing summary: Bleak news from Maplin and Toys R Us
Time to wrap up, before wrapping up to face the snow outside....
Here’s a closing summary:
Toys R Us and Maplin have entered administration on the same day, putting more than 5,000 jobs at risk at two of the UK’s best-known retailers.
Administrator Moorfields said it was managing an “orderly wind-down” of Toys R Us, which has about 3,000 staff, while PwC has been appointed to oversee the administration of Maplin, which employs 2,500 people.
Labour called on the government to hold urgent talks with trade unions and the companies to ensure that jobs are safeguarded and address weakness in the retail sector.
Moorfields said it still holds out hope of finding a last-minute buyer for all or part of Toys R Us, with its newer stores most likely to attract interest.
Simon Thomas, a partner at Moorfields, said: “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 adding that customers should do so as soon as possible, before any store closures take effect. “We will make every effort to secure a buyer for all or part of the business.
“Whilst this process is likely to affect many Toys R Us staff, whether some or all of the stores will close remains to be decided. We have informed employees about the process this morning and will continue to keep them updated on developments.”
Here’s our latest news story, which will be updated later.
Good night, and good luck to those 5,500 employees. GW
If you work for Toys R Us or Maplin and have been affected you can tell us your experience and share your views using our encrypted form.
Your stories will help our journalists have a more complete picture of these events and we will feature some of them in our reporting.
This piece may be useful for customers:
Investors who loaned money to Toys R Us face significant losses.
As Alan Higgins, the CIO of Cootts, points out, Toys R Us bonds were trading close to their face value until last summer - when the US parent sought bankruptcy protection.
Spare a thought (III) for the bond holders, this time Toys R Us, just 8 months before bond holders get all their money back then this happens : pic.twitter.com/pZfdGy072o
— Alan Higgins (@CouttsUKCIO) February 28, 2018
Analyst: More retail casualties are likely
Over in the City of London, the FTSE 100 index of top shares has closed down 50 points or 0.7% at 7231.
The selloff was mainly due to worries that American interest rates are going to rise sharply this year. But the problems at Toys R Us and Maplin did cast a shadow over traders. Consumer cyclical stocks fell 0.5%, while non-cyclicals fell almost 1%.
Among smaller companies, Mothercare slumped 9% to a new all-time low of just 28.35p (back in 2010 they were worth over £5).
Fiona Cincotta, senior market analyst at City Index, says today’s twin administrations show that retailers are suffering badly. Other casualties could follow, she fears.
Firstly, the squeeze on the consumer thanks to elevated levels of inflation, combined with wage declines in real term, which is causing consumers to rein in their spending on damaging level. And secondly, this reining back in spending couldn’t have come at a worst time in the high street’s history, as consumer habits change towards online shopping, favouring the likes of Amazon for their fast delivery and wider selection and more competitive pricing.
“This brutal combination is hitting the high street hard. Stores are struggling at best, but if in the case of Toys R’ US there is excessive additional burdens, then survival is questionable.
It is very unlikely that these two retail giants will be the last casualties on the higher street, quite the opposite. With the online shopping revolution in full swing and tough economic conditions set to continue for the UK in the face of Brexit, there is a very good probability that more victims will fall. “
Heads-up: That ‘open as usual’ sign outside Toys R Us in Manchester isn’t as new as I thought, sorry....
There’s a chilly corner of intu Merry Hill shopping centre in Dudley, near Birmingham, that captures today’s grim retail news.
There, a Maplin and a Toys R Us store sit, side by side - with a sign in one of the windows confirming that the administrators are now in charge.
Reader Shaukat Abbas kindly sent me these photos:
Updated
Maplin shoppers: The staff are good, but the stock's cheaper online
Over in Manchester, my colleague Frances Perraudin has been speaking to Maplin customers about its fall into administration this morning (reminder, she visited Toys R Us earlier)
She writes:
Coming out of a small Maplin store on Manchester’s Oxford Road, student Jack Poulton was clear that the business has been a victim of the rise of e-commerce. “Most of the products that they sell, a lot of people – especially younger generations – will now look online for,” he said.
“The only reason I came in today is its proximity to the university and because I needed something immediately, otherwise I would have gone online myself.”
Poulton had visited the shop, which has been on the same site for more than 30 years, to see if they stocked a specific magnifying lens. “They didn’t have it,” he said. “But the manager knew instantly where to look. I would have no complaints about the service. It’s just that it’s very easy to find what they sell in Maplin on Amazon these days.”
Fellow student Mike Ellis said it was a shame that the expertise held by staff at electrical shops like Maplin was being lost.
He said:
“Sometimes you just want to be given advice, which these guys are very well trained for.
Without that you are suddenly on your own.”
Inside the tidy and well-ordered store this lunch time, the staff – who usually outnumbered customers three-to-one – said they could not speak to the press, but confirmed that they had heard the news about the business that morning.
Aslam Malik, who works for Manchester city council, popped in on his way past, after hearing that the company was going into administration, to see if they had a cheap DVD player for his nephew. He did not find what he was looking for.
He aded:
“What they sell is quality stuff, but they are very expensive.
“You can buy a printer for £20 or £30 from Tesco and Asda these days. I would usually look on ebay and at the big supermarkets for things like that.”
Update: I incorrectly wrote earlier that the Toys R Us branch in Manchester has hung an ‘open as usual’ sign outside. A reader has now got in touch, to kindly explain that the sign has been there for a while (!). Apologies...
Updated
Toy sellers have been hit by a triple-whammy of problems recently, which all contributed to Toys R Us’s predicament.
The slump in the pound after the Brexit vote has driven up costs, while the growth of electronic devices, and the rise of counterfeit goods have eaten into sales.
Amisha Chohan, equity research analyst at Quilter Cheviot, explains:
“Sales in the UK toy market fell by 2.8% to £3.4bn in 2017, according to the British Toy and Hobby Association (BTHA) and the NPD Group. This has been driven by a number of reasons; there has been a shift to screen games as opposed to physical toys.
Licenses have been under-performing for a while, and there is the ever-growing concern of counterfeit toys. As with all retailers, toy shops have also been impacted by the shift to online sales. The impact of Brexit on the strength of the Sterling (particularly last year), together with inflationary pressures such as the increase in minimum wage, has also made a significant dent into their margins.”
The collapse of Toys R Us and Maplin into administration is going to ripple through the UK retail sector - and hurt companies in their supply chain.
Helena Kanczula, Corporate Tax Director at accountancy firm Blick Rothenberg, explains that some suppliers will be left with unpaid bills.
There is an order of priority regarding who ranks above who when a company goes into liquidation and trade creditors would be below secured creditors such as banks and the company’s employees. There may therefore be limited funds available to distribute to suppliers.
Research from YouGov has shown that the UK public lost confidence in Toys R Us after its US parent limped into bankruptcy protection last autumn.
Amelia Brophy, Head of Data Products UK at YouGov, explains:
“Certainly, in the UK at least, people recognised the struggles the brand was experiencing. Its Buzz score (whether you have something positive or negative about a brand) had lingered around the +2 mark prior to September 2017. Since that time, its score has plummeted to a low point of -25.
The knock-on effect of this is that the public opinion deteriorated. Its Impression score, which had stood around the +16 mark, dropped as low as -1.
Most damaging of all of course, it that fewer people felt that they’d consider shopping with Toys R US. Its Purchase Consideration (would you consider buying something from a brand) score among the general public had declined to +9 prior to the news it has entered administration, where once it had averaged a more respectable +15.
It would have been hoping that the Christmas trading period would have injected some life back into the business, but our data indicates that it struggled to attract customers in the same way it once had, with only a small rallying in Impression score and Buzz. This is despite its Ad Awareness score jumping to +17, which does compete with previous years’ levels.”
QC: The outlook for creditors is bad
The British arm of Toys R US has been struggling since its US parent company filed for bankruptcy protection last September.
The UK arm kept operating, in the hope of finding a buyer. That sounds laudable, but Philip Marshall QC of Serle Court argues that creditors could now lose out.
The list of creditors includes the government (through its unpaid £15m VAT bill) and the UK’s pensions protection scheme (which picks up a £37m deficit).
Marshall explains why some tough questions need to be asked:
“On the face of it one might say it is a surprise that the administration of the UK subsidiary of Toy R Us did not come sooner given the insolvency of its parent in the US some months ago and the well known difficulties of high street retailers in the face of online rivals.
One question that may need proper investigation is whether the board acted properly in deferring administration in the face of market pressures (and ongoing losses) in the hope of securing a sale. Given that there is apparently a deficit to both the Revenue and Pension Protection Fund the outcome for trade creditors cannot be good and they may wish a proper investigation to be undertaken by the administrators to determine whether there is culpability here”.
Toys R Us nearly collapsed last December, before the company agreed to inject an extra £9m into its pension fund.
But today’s administration means Britain’s Pension Protection Fund takes over the scheme, which currently has a £37m black hole.
Ian Browne, pension specialist at Old Mutual Wealth, says existing pensioners will be protected, while current workers will lose some of their pension pot.
“Members of the company’s pension schemes need not panic. When schemes collapse they fall into the hands of the PPF, who have the responsibility for paying workers’ pensions. Those who already reached the scheme’s normal pension age will receive 100% of their pension. For those who haven’t reached the normal pension age, the PPF will pay 90% of what their pension is worth, up to a cap. This cap is currently just over £38,500 per year for someone retiring at 65, so it only affects the highest earners.
Members of the scheme can still take early retirement and a tax-free cash lump sum. In fact, the way PPF calculates these can sometimes be more generous than a typical scheme.
The problems at Toys R Us show that the era of retail parks may be over.
So argues Dr Gordon Fletcher, retail expert at the University of Salford Business School. He says large out-of-town retail parks fail to meet customers’ expectations today:
“With ToysRUs and Maplin going into administration today, the constant change in the retail sector is now being felt in retail parks as much as the high street. These familiar brands have struggled to keep pace with the growing preference for online retail. But it is not just a matter of more people buying online, it is also what these retailers offered as their customer experience.
Visiting a toystore with children is generally a fraught experience for most adults. Combined with the fact that a planned visit to a toystore will often require a degree of secrecy from the very same children, the failure of Toys R Us becomes much clearer.
With a business model that imitated a grocery superstore that relied primarily on offering competitive pricing points in out-of-town locations there were few opportunities to discover something new or to create an environment that encouraged adult drivers to linger as long as their children wanted to.
Toys R Us shoppers: It's too pricy, and not what it was
Our North of England reporter Frances Perraudin reports from a Toys R Us store in Manchester:
Late on Wednesday morning, removal men Mark Connor and John Banks have popped into a tired looking Toys ‘R’ Us store on the outskirts of Manchester city centre for a “nostalgia trip”.
“It’s like a relic from the 80s,” says Banks. “The last time I came here, I was playing with transformers.”
Connor is keeping his eye out for Lego or Star Wars toys for his five-year-old son, but despite this morning’s announcement that the company would be going into administration, he says prices at the shop in the Ancoats area of the city are still too high.
“I’ve just compared one item they’ve got over there to what’s on ebay and it’s £40 there and you can get it for £15 online.”
“I think toy shops like this put smaller toy shops out of business, so I personally think [the company’s collapse] might actually give the smaller toy shops a bit of a niche market,” says Connor.
“I’m not saying it’s a good thing, because it’s never a good thing when a big company goes out of business because loads of people lose their jobs, but it might regenerate a local toy shop mentality and help local businesses.”
The 30,000 square foot store was earmarked for closure before today’s announcement, as the area is in line for redevelopment. On Wednesday morning only a small handful of customers could be seen wandering through its aisles of garish toys, with around 15 members of staff standing huddled chatting near the tills.
Mike Meszaros, who works in branding, has come into the store to find an outfit for his son for World Book Day.
“I remember coming in here when I was seven years old and it was busy,” he says.
“You’d come in and it was like Hamley’s. You’d have staff demonstrating the toys. They’d have stuff set up that you could play with and there would be toys everywhere that you could use before you bought them. It’s not like that now. It’s quite sad really.”
Updated
Labour MP Peter Kyle says Maplin’s administration shows the wider impact of the weak pound on UK firms who import goods.
Far from ushering in a bright economic future, the threat of Brexit has put jobs and investment at risk.
.@peterkyle – Maplin shows “the threat of Brexit has put jobs and investment at risk” https://t.co/LCzr04bpCh pic.twitter.com/NKMfFxtsMe
— Open Britain (@Open_Britain) February 28, 2018
Concerns over unpaid tax bills at Toys R Us
Adam Deacock, a Barrister at Radcliffe Chambers, fears it won’t be possible to save all Toys R Us and Maplin’s stores.
He explains:
The administrators’ statutory task is to rescue a company and its business as a going concern if this is possible. In practical terms this is highly unlikely, as a buyer will be unlikely to wish to take over their debts and liabilities or all of their stores, so the administrators’ next task is to attempt to get the most they can for the assets.
The hope for the companies’ 5,500 employees is that a buyer can be found for the businesses who will take over as many as possible of the stores, their employees and their pensions in one go, but the administrators’ concern is simply to produce the best result for creditors.
Deacock points out that the UK government could be hit in the pocket:
“As taxpayers we should all be concerned as the immediate cause of Toys R Us’ administration appears to be its unpaid VAT bill of £15m and other unpaid tax debts can be expected.
Another interesting tweet from Patrick O’Brien, suggesting that Amazon will profit from Maplin’s problems:
If Maplin stores close its going to be Amazon that benefits the most pic.twitter.com/1NB51sigQe
— Patrick O'Brien (@pat_gdretail) February 28, 2018
Patrick O’Brien of UK Research Director at Global Data Retail reckons that Smyths, Ireland’s biggest toy retailer, was at least partly responsible for Toys R Us’s demise.
E-commerce may have destroyed the 'everything under one roof' USP of Toys R Us, but in the UK, it was Smyths, not Amazon that caused the most damage pic.twitter.com/j6c8iVdnEe
— Patrick O'Brien (@pat_gdretail) February 28, 2018
Smyths has been expanding in the UK recently, and almost doubled its UK pre-tax profits last year. It has offered a range of bargain toys, aimed at shoppers on a budget.
Pat Lynes, business transformation expert and founder of Sullivan & Stanley, fears that more retailers will follow Maplin and Toys R US.
Lynes pins the blame on outdated management who haven’t adjusted to today’s business conditions:
Toys R Us and Maplin facing collapse is sadly not surprising. They haven’t re-engineered their operating model to focus on digital platforms and the customer experience. A lot of executives of these older corporations are sitting within organisational structures that were fit for the nineties and maybe the noughties, but aren’t fit for today’s rapid-pace, changing world.
Without the ability to adapt quickly, sales will slide. It’s the same Blockbuster story repeating - how many others will be next?
Updated
Another example of why high street stores such as Maplin will be missed.
This is super sad. Growing up as a nerdy kid, Maplin was my happy place, the staff there helped me with so many school science projects. https://t.co/o3ssh4Lnkn
— Dr Paul Coxon (@paulcoxon) February 28, 2018
Dr Coxon now works at Cambridge University, making silicon solar cells more efficient, so those projects clearly paid off.
PwC: Weak pound hurt Maplin
PwC have confirmed that they’ve taken control of Maplin, and are looking for a buyer for some, or all, of the company.
They also say that Maplin was hurt by the fall in sterling – which slumped against rival currencies after the Brexit vote in June 2016.
Zelf Hussain, joint administrator and PwC partner, says:
“The challenging conditions in the UK retail sector are well documented. Like many other retailers, Maplin has been hit hard by a slowdown in consumer spending and more expensive imports as the pound has weakened.
“Our initial focus as administrators will be to engage with parties who may be interested in acquiring all or part of the company. 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.”
Updated
Dom Tribe, retail sector specialist at supply chain firm, Vendigital, says Toys R Us failed to keep pace with changing shopping habits, including internet retail.
Despite losing significant market share to competitors such as Amazon and Argos, Toys R Us failed to implement an effective E-commerce model with expedited shipping options and also continued to rely on its large warehouses. Opened in the 1980s and 90s, these have proven highly costly to run, with difficulties around managing stock levels, and have been outperformed by its new smaller stores.
Toys R Us’ relationships with key suppliers also hit the headlines over the last year, with the chain demanding long payment terms and exclusivity on certain ranges despite no longer being the key player in the market.
Guardian columnist Gaby Hinsliff has written a good thread about why the collapse of toy stores matters:
If Amazon kills off the likes of ToysRUs, that's got real implications for the way kids consume. (NB; this will be a short thread but still boring for non-parents)
— Gaby Hinsliff (@gabyhinsliff) February 28, 2018
That thing of letting your kids loose in a physical shop & seeing what they're drawn to, which is invariably not the (educational) stuff you wanted to buy for them? That's dying out.
— Gaby Hinsliff (@gabyhinsliff) February 28, 2018
So toys will sell increasingly on hype - ads, or stuff like fidget spinners that go viral - not on picking stuff up & seeing how you could play with it. Less chance to see that plastic tat looks less appealing in real life than on telly.
— Gaby Hinsliff (@gabyhinsliff) February 28, 2018
Poncey boutique toy shops selling adorable overpriced wooden toys that parents like & children don't will survive. Ditto The Christmas Circling Of Things In The Argos Catalogue. But a consumer skill gets lost I think. (end of boring thread)
— Gaby Hinsliff (@gabyhinsliff) February 28, 2018
Updated
City analyst Neil Wilson of ETX Capital says retailers are suffering from “structural game-changers and a softening in consumer confidence”, which can be fatal for firms who haven’t adjusted.
“Toys R Us has officially entered administration, with stores to remain open for the time being. The company failed to adapt and was stuck with a large portfolio of large warehouse shops. No experience for customers, no compelling online presence. A £15m VAT bill did for Toys R Us in the end after another poor Christmas, but it was a systemic failure to move with the changes in the retail sector that really did for it.
Maplin has also gone into administration in what’s now a pretty torrid day for UK retail. In both cases the Amazon effect is all too clear to see, but there is more to it than that – there are retailers out there who are adapting and prospering.
He also points out that Mothercare’s shares have fallen today (currently down 7%, having been 12% lower earlier).
Mothercare shares drop 12% as Toys R Us U.K. enters administration pic.twitter.com/iEqo0BDlzr
— Joe Easton (@marketsjoe) February 28, 2018
Maplin, like Toys R Us, has struggled in the face of online retailers who were able to undercut its prices.
But if the company does disappear from the high street, shoppers may struggle to lay their hands on a particular cable, battery or peripheral at short notice:
The second order consequences of Maplin going will be profound: Every event that requires AV or IT capabilities will no longer have somewhere to buy adapters and cables in an emergency.
— James O'Malley (@Psythor) February 28, 2018
Maplin has gone under. A sad day for engineers.
— Martin Veart (@Martin_Veart) February 28, 2018
Labour: Devastating news for UK workers
Rebecca Long-Bailey, Labour’s Shadow Business Secretary, is urging the government to help Maplin and Toys R Us’s employees:
“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 centres.
“The Government must urgently meet with both the unions and the companies to ensure that these jobs are safeguarded.
“Workers are suffering stress and anxiety not knowing what the future holds for them. In the event of job losses, the Government must act quickly to ensure all workers receive swift redundancy payments and are properly supported.
“The Government must also urgently address problems across the retail sector.”
Updated
Maplin falls into administration
BREAKING: Electrical goods chain Maplin has also fallen into administration, in an increasingly dark morning for UK retail.
This puts around 2,500 jobs at risk.
Maplin, which has over 200 stores in the UK, was forced into administration after failing to find new funding -- less than an hour after Toys R US suffered the same fate.
Graham Harris, CEO of Maplin, has blamed the slump in the pound since the EU referendum, saying:
“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 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. This necessitated an intensive search for new capital that in current market conditions has proved impossible to raise. These macro factors have been the principal challenge not the Maplin brand or its market differentiation.
We believe passionately that Maplin has a place on the high street, and that our trust, credibility and expertise meets a customer need that is not supported elsewhere.
We will now work tirelessly alongside Zelf Hussain, Toby Underwood and Ian Green, from PWC, who have been appointed as the as Joint Administrators of Maplin Electronics Limited, to achieve the best possible outcome for all of our colleagues and stakeholders.”
Updated
A whopping VAT tax bill helped to push Toys R Us over the edge.
The company owed £15m, and a disappointing Christmas trading performance left it without enough funds to pay - triggering its fall into administration.
Time for some nostalgia with Geoffrey the Giraffe, who starred in Toys R Us’s iconic ‘Magical Place’ advert back in 1989:
Here’s Rob Davies’s breaking news story on Toys R Us:
Toys R Us staff discovered earlier this morning that their employer has fallen into administration.
Moorfield’s partner Simon Thomas, who is now running Toys R Us, says:
“We have informed employees about the process this morning and will continue to keep them updated on developments. We are grateful for the commitment and hard work of employees as the business continues to trade.”
Updated
Hannah Maundrell, Editor in Chief of money.co.uk, has some advice for Toys R Us customers and staff, following today’s news.
“It’s undoubtedly distressing news for employees of Toys ‘R’ Us especially because their fates have been uncertain for so long. Unfortunately they aren’t the only retailer that has been struggling.
“Anyone who is worried about the future of their job should prepare themselves now. Check what redundancy rights you have and dig out any income or mortgage protection policies you hold just in case.
“Toys ‘R’ Us have reported they will continue trading for now, however it’s currently unknown whether they will still accept gift vouchers and offer refunds. If the administrators decide to suspend gift vouchers and refunds and you paid in cash you could be in for a lengthy battle to get your money back.”
Here’s her guide explaining how credit card spending is protected in the UK:
How does Section 75 protect your credit card spending?
Updated
Richard Lim, chief executive of Retail Economics, says Toys R Us is another victim of the “seismic structural changes” hitting the UK high streets (such as rising operating costs and the threat from online retailers).
He adds:
“Put simply, the retailer was too slow to embrace omnichannel, were burdened with too many stores and failed to deliver a retail ‘experience’ good enough to stand out from their competitors.”
Toys R Us’s administrators haven’t given up hopes of finding a buyer, for at least some of its 100+ outlets.
In the meantime, existing stock will probably be offered at a sharp discount:
Toys R Us has gone into administration after it wasn't possible to sell it as a going concern. Moorfields Advisory Ltd have been appointed administrators. All 100 UK stores will continue trading for now & lots of the stock will be discounted.
— Joanna Partridge (@JoannaPartridge) February 28, 2018
From Toys R Us administrators Moorfields: "We will make every effort to sell all or part of the business. The newer, smaller, more interactive stores in the portfolio have been out-performing the warehouse-style stores"
— Joanna Partridge (@JoannaPartridge) February 28, 2018
Toys R Us administration: Instant reaction
Toys R Us customers are being urged to cash in any vouchers and gift cards ASAP, following its collapse into administration this morning.
Toys R Us details: All stores will trade until further notice, customers should use gift cards/vouchers asap, administrators will run orderly wind down of UK business with closing down sales. @BBCNews @BBCBusiness pic.twitter.com/ozYxHLSkfc
— Ben Thompson (@BBCBenThompson) February 28, 2018
Toys R US has been dragged into administration by its “unmanageable rent bill”, according to the Financial Times.
Executives had been battling to raise cash to pay a tax liability that fell due this week, but the efforts collapsed after a number of private equity funds and restructuring specialists walked away.
Insolvency specialists at Moorfields have begun the process of closing its British operations, which employ nearly 3,000 people and has an estimated funding shortfall of at least £25m in its pension scheme.
Retail analyst Fiona Paton points out that several other retailers have gone under recently:
.@ToysRUs has entered administration after months of battling to stay afloat. This follows Warren Evans, East and Multiyork - demonstrating the tough UK retail climate in 2018 and the need to stay relevant against online. https://t.co/hG9ih9B0W5
— Fiona Paton (@fiona_GDretail) February 28, 2018
Toys R Us falls into administration
NEWSFLASH: Retailer Toys R Us has fallen into administration, putting around 3,000 jobs at risk.
Press Association has the details:
Administrator Moorfields has been appointed to conduct what it called an orderly wind-down of the company’s store portfolio, although the firm insisted it is still seeking a buyer.
Simon Thomas, Moorfields partner, said: “We will be conducting an orderly wind-down of the store portfolio over 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.
“We will make every effort to secure a buyer for all or part of the business.”
Toys R Us retailer has been hunting for a buyer for several weeks, but without success.
The company, which has 105 stores in the UK, 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.
More to follow....
Updated
Foxtons profits shrink by two-thirds
London-focused estate agent Foxtons has blamed a plunge in profits on Brexit uncertainty and stamp duty changes that have driven sales in the capital to near record lows.
The company said waning consumer confidence against a backdrop of political uncertainty was weighing on the London housing market, driving a 65% fall in pre-tax profits in 2017 to £6.5m.
Foxtons said changes to rules in 2016, when the government imposed a new stamp duty surcharge on second homes, had also contributed to a weaker market and falling profits.
Nic Budden, the chief executive, warned 2018 would be another tough year. “We are pleased to have delivered a performance in line with market expectations. However, sales activity in the London property market is near historic lows and this had a significant impact on our overall performance in 2017.
UK broadcaster ITV has slumped to the bottom of the FTSE 100 leaderboard, after reporting a 10% drop in earnings.
Statutory pre-tax profits fell to £500m last year, from £553m in 2016, highlighting the tough market for advertising.
ITV blames the “uncertain economic environment”, which is overshadowing new CEO Carolyn McCall’s ‘strategic refresh’. It has also stopped paying a special dividend to shareholders (they’re still getting a normal divi, though).
McCall sounds confident about the future, saying:
We have a solid foundation to build on, and a strong balance sheet and healthy cash flows gives ITV the flexibility to make the right strategic decisions for the long term future of ITV in an increasingly competitive environment whilst still delivering sustainable returns to shareholders.
ITV shares -6% to 162p as it cancels special dividend. Co. in good shape though with new CEO Carolyn McCall (formerly Easyjet) discussing a refresh of the brand. Liberum speculating an acquisition in sight, possibly Scottish TV but that maybe premature for her to be considering
— Paul Kavanagh (@PaulJKavanagh1) February 28, 2018
The prospect of several US interest rate rises this year has also hit American government bonds.
As the price of US Treasuries has fallen, the yield (or interest rate) on the bond has risen. If borrowing costs are indeed going up, then investors want a higher return on their money.
This means the gap between US and eurozone bonds has hit its widest level since the euro was created.
US/euro zone 2-year yield spread 280 bps, widest since euro's launch in 1999 as markets price in further Fed rate hikes. But dollar not getting much traction because $ hedging costs are soaring. Good piece via @saikysays @abhinavvr https://t.co/gZ8T6UnMzK pic.twitter.com/3cIp22vGYY
— Jamie McGeever (@ReutersJamie) February 28, 2018
European markets hit by interest rate worries.
European stock markets are all falling in early trading, as investors react to last night’s testimony from Fed chair Jerome Powell.
The main indices are all down around 0.5% - a modest move, but one that highlights the worries about US interest rates.
In London, the FTSE 100 has been pulled down by mining stocks. They’re suffering because Powell’s upbeat comments have boosted the US dollar (thus pushing down commodity prices, which are priced in dollars).
Powell’s “undeniable optimism towards the US economy”, and his hawkish comments on interest rate moves, is hurting the markets, says Jasper Lawler of London Capital Group:
Due to Powell’s strong outlook on the US economy, he considers it necessary to continue gradually increasing interest rates in order to prevent the US economy from overheating.
On his hawkish tone, when asked the million-dollar question about 3 hikes or 4, Powell was quick to point out the improvements in the economy and his optimism that inflation will reach the bank’s 2% target, in what can only be described as a hawkish response, which to many signalled 4 hikes could be on the cards in 2018. Powell’s comments unleashed a wave of anxiety among equity traders, who rushed to sell out of holdings.
Vive la France!
Statistics body INSEE has just raised its forecast for French growth last year to 2%, up from 1.9%. That confirms that 2017 was the best year for France’s economy since 2011.
INSEE also confirmed that GDP rose by 0.6% in the last three months of 2017, matching its initial estimate.
With all this talk about interest rate rises, it’s worth remembering that America doesn’t really have an inflation problem right now....
Fed Chairs & Inflation: pic.twitter.com/gDehd5nzjS
— Michael McDonough (@M_McDonough) February 27, 2018
Stock markets across Asia have all fallen today, after Fed chair Jerome Powell’s hawkish comments reignited interest rate hike fears.
The Japanese and Hong Kong indices are leading the selloff, down 1,5% each. Here’s the damage:
Cautious investors are taking a “guarded approach”, says Lukman Otunuga, research analyst at FXTM:
It is becoming increasingly clear that global stocks still remain highly sensitive to the prospects of rising inflation and interest rate fears. With Powell’s testimony fuelling market speculation of higher US interest rates this year, stock markets remain exposed to downside risks as equity bears lurk in the background.
The agenda: Powell's testimony weighs on the markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
City traders have one thing on their mind today (well two, if you include the snow gripping the capital). How many US interest rates rises are heading our way, and how will the markets cope?
For this, we can thank the new head of the Federal Reserve. As we covered in yesterday’s blog, Fed chair Jerome Powell struck an upbeat tone about the US economy when he faced Congress yesterday.
Powell told US lawmakers that he has become more optimistic about the US economic outlook since December, predicting some good years ahead with rising wages growth.
If he’s right, then it’s good news for Americans, but potentially bad news for investors as the Fed is more likely to tighten monetary policy to prevent inflation running out of control.
The big fear in the markets is that the Fed could squeeze four rate hikes into 2018, ending the era of cheap money.
Mike van Dulken of Accendo Markets explains:
A hawkish Jay Powell indicated US interest rates set to continue to rise in his first public outing as Federal Reserve Chair, prompting many to expect four rate hikes this year rather than three.
Shares fell on Wall Street last night after Powell spoke, triggering losses in Asia overnight - and likely falls in Europe today. The FTSE 100 has just opened, down 36 points at 7245.
London stocks to ease lower at the open, matching UK temperatures. New Fed chief Powell repeated a view of gradual rate increases and the DJI lost 300pts over the session. Nikkei -1.4% too, US 10yr yield 2.90%. $ firmer across the board , 1.39 vs £.
— Equity Development (@equity_research) February 28, 2018
Also coming up today:
There could be Brexit fireworks , as the EU publishes the first draft of the withdrawal treaty. This may bring the sticky question of the Irish border into renewed focus - Theresa May has already declared that she won’t sign anything that “threatens the integrity of the UK’
It's Brexit's big reckoning in Brussels today. All you need to know in this morning's @ftbrussels briefing 📫📨 https://t.co/iRAYENCT09 pic.twitter.com/5ZgSDXiHnV
— Mehreen (@MehreenKhn) February 28, 2018
There could be drama in UK retail too, with Toys R Us and Maplin both on the brink of administration.
On the economic side, we get updated growth figures from the US and France, plus the first estimate of eurozone inflation .
The agenda
- 7.45am GMT: New estimate of French GDP for Q4 2017
- 10am GMT: Flash estimate of eurozone inflation in February
- 1.30pm GMT: New estimate of US GDP for Q4 2017
Updated
