Retailers on the Brink of Collapse

Retailers Claire’s and The Original Factory Shop (TOFS) are on the verge of collapse, putting over 2,000 jobs at risk. This development marks a bleak start to the new year for Britain’s high streets. The two chains, which operate over 300 branches and employ around 2,500 people, are owned by the investment firm Modella Capital.

Background

Modella Capital bought both TOFS, which was already on the brink of collapse, and Claire’s, which had brought in administrators over the course of several months last year, in separate deals. The company also owns businesses including the historic Main Street property of WH Smith, renamed TG Jones, and Hobbycraft.

Reasons for Collapse

A combination of government policies with a significantly increased tax burden on retailers and demands from landlords to take back parts of Claires and TOFS stores have made the future of both chains unviable in their current form. Additionally, the move to a new third-party logistics provider is believed to have contributed to the challenges facing TOFS following last year’s deal. Claire’s, meanwhile, has been hit by the decision of its largest concession partner to terminate its contract following its takeover by Modella.

Impact on Employees and Stores

The filings will give both Claire’s and TOFS a temporary reprieve from creditors, underlining the UK’s fragile retail environment. Interpath Advisory and Kroll are expected to take over management of TOFS and Claire’s, respectively. The administrators are likely to intend to continue trading in the two companies while looking for buyers. The retail industry continues to face significant headwinds, with data showing retail football fell 13.1% year-on-year on December 23, the last full shopping day before Christmas.

Future Prospects

In 2025, chains such as Poundland and River Island were forced to restructure to avoid collapse. Many industry analysts are warning of another bloodbath in the industry this year. Claire’s previously operated in almost 300 stores across the UK but was hit by changes in consumer behavior among its traditional youth customer base. Before the company was purchased by Modella, numerous jobs were lost as part of restructuring processes. Modella declined to comment when contacted.