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Blockbuster Administration Pushes U.K. Closures to a Record

Jan. 16 (Bloomberg) -- Blockbuster Entertainment Ltd., a British DVD rental chain, became the third major U.K. retailer to enter administration this year after it appointed Deloitte LLP to seek a buyer.

Deloitte is “working closely with 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,” the accounting firm said in a statement.

Blockbuster’s announcement comes a day after HMV Group Plc, Britain’s biggest seller of CDs and DVDs, sought insolvency protection. Both retailers have been hurt by growing competition from online retailers such as Amazon.com Inc. and a shift by consumers toward obtaining movies and music through digital channels. The various collapses in the last two months have pushed administrations and closures to an all-time high, according to the Local Data Company, a real-estate researcher.

“The administration and potential closure of over 1,400 stores in less than a month far surpasses Woolworths 807 in January 2009,” Matthew Hopkinson, director at the Local Data Company said. “This has the potential to increase the national shop vacancy rate by nearly 5 percent to an all-time high of over 19 percent if all the stores close and are not reoccupied.”

The Jessops camera chain last week became the first U.K. failure of 2013 when administrators shut all 187 stores.

U.S. Equivalent

Blockbuster, based in Uxbridge, England, has 528 U.K. outlets that employ 4,190 people, Deloitte said. Its U.S. equivalent filed for bankruptcy in 2010 and was acquired by Dish Network Corp. in 2011. Dish closed about half of its 1,700 stores.

“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,” Deloitte partner Lee Manning said in the statement.

Blockbuster will continue to accept gift cards, unlike HMV, which said yesterday it won’t redeem vouchers or accept returns.

“Its estate of 528 stores is far too large and not in proportion to the current realities of the markets in which it operates,” Joseph Robinson, a consultant at Conlumino said in an e-mail. “It is inevitable that there will be further casualties in 2013 which will add to vacancy rates and hasten the decline of some high streets.”

Prime Minister David Cameron’s spokesman Jean-Christophe Gray spoke out on the collapse today.

“It’s clearly very difficult indeed for those affected by the job losses, of course,” Gray told reporters. The government’s focus is “on supporting the conditions for a private sector recovery.”

The British Retail Consortium has called on the government to reduce the planned 2.6 percent increase in business rates in April to ease pressure on retailers.

With assistance by Kitty Donaldson.--Editors: David Risser, Robert Valpuesta

Sarah Shannon in London at +44-20-7073-3262 or sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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