Zavvi joins list of retail casualties

Zavvi, the CDs, DVDs, gaming and books retailer, became the third high street victim of the financial crisis in less than 24 hours as administrators moved in.

Administrators Ernst & Young said they intended to trade the 114-store Zavvi UK with a view to selling all or part of the business as a going concern.

Zavvi was formed just 15 months ago from a management buyout of the Virgin Megastore division of the Virgin Group.

Its collapse, coming hours after two other well-known retailers moved into administration, a form of creditor protection, underlined the pressure the sector is facing from the consumer downturn.

Menswear retailer The Officers Club appointed PricewaterhouseCoopers as administrators who promptly sold 118 of its 150 stores to its chief executive officer, David Charlton.

Although 32 stores will close, the deal secured the jobs of 1,000 staff.

Hours earlier Whittard of Chelsea, the 165-store tea and coffee retailer owned by troubled Icelandic investor Baugur, brought in Ernst & Young, who immediately sold the business to private equity investor Epic for an undisclosed sum.

Wednesday's Financial Times reported that loss-making Allied Carpets has been put up for sale by its French owner, Tapis Saint-Maclou. Tapis was not immediately available to comment.

With consumer confidence dented by crumbling house prices and soaring unemployment, British retailers are experiencing the most difficult trading environment for years and several have already fallen into administration.

Variety store retailer Woolworths and flat-pack kitchen seller MFI are the most high-profile casualties so far.

Earlier this week, insolvency specialists Begbies Traynor predicted 15 national and regional chains will collapse early next year.

Britain's economy shrank in the third quarter for the first time since 1992 and at a faster rate than previously thought, official data showed on Tuesday, reinforcing expectations that the country is heading into recession.

Last month Entertainment UK, Zavvi's main supplier and part of Woolworths, went into administration which meant Zavvi had difficulty obtaining stock on favourable credit terms. This resulted in considerable working capital difficulties, in addition to continuing operating losses.

"In the absence of a buyer for EUK, and with dire trading conditions on the high street, the Zavvi Group has seen a material fall in sales and the directors have now been forced to place parts of the group in administration," said joint administrator Tom Jack.

Ernst & Young said Zavvi Guernsey will be liquidated, while the 11-store Zavvi Ireland business was not subject to any formal insolvency proceedings.

The Zavvi Group as a whole employs 2,363 permanent staff and 1,052 temporary staff.