Focus DIY calls in the administrators

The consumer spending squeeze claimed its latest victim on Wednesday when Focus DIY, the private equity backed retailer, called in administrators in a decision that puts almost 4,000 jobs at risk.

After struggling for years with a large debt burden and the troubled state of the home improvement market, the 178-store chain finally said that it had “no alternatives” available as it was about to default on its loans.

Administrators from Ernst & Young are due to be appointed as early as this morning and will decide if Focus can continue as a going concern.

The collapse of one of Britain’s biggest home improvement chains by sales is the latest blow to the UK retail sector. Oddbins, Officers Club, Henleys and Alworths have all fallen into administration in recent weeks.

Parties interested in parts of Focus include Chris Dawson, who bought parts of MFI and Empire Direct to help build The Range, the furniture and homewares chain he founded.

Mr Dawson said on Wednesday that he was interested in the retailer’s stock and stores “if the price is right” and “people are serious and sensible”.

Other potential buyers of the assets include Kingfisher, owner of the B&Q chain, which according to Reuters has said in the past that it would consider acquiring the company’s individual stores.

Focus traces its origins to 1987, when Bill Archer founded a DIY business in the north of England. Low interest rates and the strong housing market helped the sector to perform strongly during the 1990s and early 2000s.

But the company has struggled as Britons’ love affair with carrying out improvements on their homes has waned in recent years.

Focus has also endured stiff competition from rivals such as Homebase and Travis Perkins.

US-based Cerberus Capital acquired the retailer from Duke Street and Apax Partners in 2007 in a £225m deal, which involved it acquiring the debt at a substantial discount and buying the equity for a nominal £1. Cerberus has a record of taking on relatively risky investments in struggling companies.

The company avoided administration in 2009 when it reached a rescue deal with landlords by means of a company voluntary arrangement.

But Focus has endured a fresh downturn in consumer confidence since the start of this year in the wake of higher fuel and food prices, a rise in value added tax and expected public sector job cuts.