In what is one of the bleakest weeks in UK high street history, DVD rental firm Blockbuster has become the latest UK retailer to go into administration.
The chain, which has 528 stores and employs 4,190 staff, is the latest retailer to fall foul of increased competition online and has called accountancy firm Deloitte, the same company that wound-up Comet and, more recently, HMV, to handle the administration.
The chain has confirmed it will continue to trade while it tries to find a buyer, “We are working closely with [Blockbuster UK’s] suppliers and employees to ensure the business has the best possible platform to secure a sale, preserve jobs and generate as much value as possible for all creditors,” said Lee Manning, from Deloitte’s Restructuring Services practice.
“The core of the business is still profitable and we will continue to trade as normal in both retail and rental whilst we seek a buyer for all or parts of the business as a going concern.
“During this time gift cards and credit acquired through Blockbuster’s trade-in scheme will be honoured towards the purchase of goods” he added.
The first Blockbuster store opened in the UK, in south London in 1989, and has since gone on to expand rapidly over the years as they moved their rental business online – but over the years the rental market became incredibly crowded and more recently Blockbuster hasn’t been able to keep pace with all-you-can-eat streaming services like Lovefilm and Netflix.
Its parent company, Blockbuster US, went bankrupt in 2011, but was actually rescued by US pay-TV provider Dish Network in £200 deal which saw a few hundred stores saved from closing, the UK arm of the business is run separately but it is also owned by US firm Dish Network.
Business experts reckon Blockbuster’s problems aren’t that dissimilar to problems that have effected retailers like Comet and HMV – failure to adapt quickly enough to digital competitors and failure to recognise changes in consumer habits.
HMV’s decision not to honour gift cards this week angered many customers, but it’s actually better news for Blockbuster as they’ve promised to honour gift cards and credit acquired via its lucrative trade-in scheme, where movies, games and consoles can be traded against future purchases.
Mr Manning said it had made this decision because it regarded the “relationship between the customer and individual store as being sacrosanct”.
The decision to appoint administrators came after losses increased at Blockbuster UK from £8.5m in 2011 to an £11.2m deficit in 2012. Last quarter’s earnings before interest, tax, depreciation and amortisation had been expected to be about 4.5m profit. However, the company made a £30,000 loss.