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High street retailers Claire’s and The Original Factory Shop are facing potential administration, placing approximately 2,500 jobs at risk.
This development unfolds amidst ongoing challenges for Claire’s, a brand popular among younger consumers for its accessories. The company has reportedly been seeking a buyer following the bankruptcy filing of its US-based parent company last year.
Modella Capital, the current owner of both retail chains, has announced that insolvency proceedings will commence across the United Kingdom and Ireland. This administration process is intended to provide the retailers with crucial time to secure a new ownership structure.
According to Modella Capital, both businesses have been significantly impacted by challenging trading conditions, compounded by “alarming” low sales during the critical Christmas trading period, leaving them in a “vulnerable” financial state.
Claire’s operates 154 stores and employs 1,355 individuals, while The Original Factory Shop maintains a presence with 140 stores and a workforce of 1,220.
Modella Capital’s acquisition of Claire’s occurred in September, just six weeks after the retailer’s prior collapse into administration. That previous restructuring resulted in approximately 1,000 job losses and the closure of 145 stores.
The investment firm has owned The Original Factory Shop since the early part of the previous year.
“This has been a very tough decision,” stated Modella Capital. “We have worked intensively in an effort to save both businesses, having made last-ditch attempts to rescue them, but neither has a realistic possibility of trading profitably again.”
Modella Capital asserted that both chains were “highly vulnerable” even prior to their acquisition. The firm also cited prevailing challenges, including the persistently difficult climate on the high street and current government policy, as contributing factors.
These two retailers are the latest to succumb to the challenging retail environment, which has seen a decline in high street sales as consumers increasingly shift to online shopping, leaving traditional brick-and-mortar stores grappling with rising operational costs.
“A combination of very weak consumer confidence, highly adverse government fiscal policies and continued cost inflation is causing many established and much-loved businesses to suffer badly,” Modella said.
The investment firm has become increasingly prominent on Britain’s high streets, having acquired WH Smith’s high street chain last year and taken over arts and crafts retailer Hobbycraft a year earlier.
Modella is the latest business to criticise measures by Chancellor Rachel Reeves which have seen operating costs rise, making trading even more difficult as high inflation – the rate at which prices rise – squeezes household budgets.
Her last Budget hiked taxes, while her previous Budget increased the minimum wage and raised employer National Insurance contributions.
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James Fitzgerald, landlord of the Thatched House in Hammersmith, said his costs have risen by £22,000 over the past year – with the increase in National Insurance a major factor.
The Treasury was asked to comment.
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