Struggling high street shoe retailer Barratts Shoes and DVD rental chain Blockbuster have called in administrators, placing more than 3,000 jobs at risk.
Both companies have been in difficulties for some time, with Barratts entering insolvency proceedings and going through a restructuring process three times in the past four years, while Blockbuster first collapsed at the beginning of this year and has subsequently gone through a turnaround, shedding stores and jobs and building a marketing campaign.
Duff & Phelps have been appointed as administrators to Barratts, which has 75 stores and 23 concessions across the UK and Ireland. It employs 1,035 staff, half of who are part-time.
Philip Duffy, partner at Duff & Phelps, said: 'Difficult trading conditions in the sector led the directors to explore potential refinancing options and additional equity for the business. The company had recently received an offer from an investor to inject £5m into the company but that offer was withdrawn on the evening of the November 7. In view of the financial position of the company and withdrawal of that equity offer the directors were left with no choice but to appoint administrators.'
Simon Thomas and Nick O'Reilly of Moorfields Corporate Recovery have been appointed as joint administrators to Blockbuster, which has 264 stores and around 2,000 employees. Last month private equity specialists Gordon Brothers Europe, who bought the business out of administration in March this year, warned the company was unlikely to survive, partly because of difficulties in signing a licensing deal which would allow it to develop a new digital platform, as well as falling sales.
Thomas said that 'there are parties who are interested in parts of the business', and that the administrators would focus on trying to secure a future for as much of the business as possible as well as trying to save jobs before Christmas.
'This is obviously a difficult and upsetting time for everyone involved at Blockbuster, in particular employees who have endured a stressful period since January this year. We appreciate that staff and customers will want a speedy resolution, however, we must ask people to be patient over the coming weeks,' Thomas said.
Julie Palmer, partner at Begbies Traynor, said that the difficulties face by Barratts and Blockbuster were similar to the problems of the so-called 'zombie' companies which are taking in some cash, but only enough to service their levels of debt rather than to grow the business.
'This news highlights that it's not only the SMEs that are surviving as zombies but also some well known larger high street companies. These zombies can get caught in a downward spiral, or a slow-death march. If published financials give cause for concern access to trade credit, which is vital in helping many companies manage cashflow and to continue trading, is even more difficult to secure. This is especially poignant around Christmas, when retailers may be seeking extended trade credit to stock their shelves ahead of the festive shopping rush,' Palmer said.
