THE retail crisis claimed another victim this weekend with childrenswear chain Adams, which has 260 stores in the UK and 116 overseas, poised to go into administration.

Adams, which makes clothes for Boots as well as trading through its own outlets, employs about 2,000 staff. It is expected to appoint accountants Price Waterhouse Coopers as administrator this week.

The demise of Adams, which follows hard on the heels of the collapse of Whittard, the tea and coffee retailer, and music chain Zavvi, comes despite record numbers of shoppers thronging UK high streets since Christmas to take advantage of the big discounts on offer.

According to retail analyst Springboard, shops were 2.3% busier on Boxing Day than on the same day last year. London’s West End, which includes Oxford Street, Regent Street and Bond Street, experienced a 3.5% increase in custom as half a million shoppers descended on the area for the day.

The frenetic activity masks a grim outlook for retailers. Among the firms thought to be vulnerable are: Focus DIY, which is renegotiating its rental arrangements and has closed stores; specialist camera shop Jessops, which has given warrants on shares to HSBC in return for a loan extension; and greetings-card chain Clinton Cards, which is reliant on short-term financing. Others are Sir Tom Hunter’s garden-centre business Wyevale, which has completed a debt-for-equity swap with its banks; and quoted furniture shop Land Of Leather, which has rejected offers for the business.

Even the largest players are not immune to the downturn. Analysts now think Marks & Spencer will be forced to issue a profit warning when it unveils its interim management statement next week. City sources think, however, that it is unlikely M&S will have to reduce its dividend payment to shareholders immediately, although that could follow later in the year.

There is also the prospect of a high-street shake-up triggered by the sale of assets now part-controlled by the government of Iceland following the collapse of Baugur, the Icelandic investment firm, and Icelandic banks, which were heavy investors in British retailers.

Icelandic ministers were said to be considering a rapid sell-off of their newly acquired assets, which could put household names like House of Fraser, Hamleys and Karen Millen into play. But retail bankers cautioned that the complicated ownership structure of the groups meant few were completely controlled by the Icelanders, but had multiple investors.

The demise of Adams comes less than two years after it was rescued from administration by entrepreneur John Shannon for £15m.

Shannon, who made a fortune selling his stake in shoe chain Stead & Simpson, had hoped to turn Adams into “Topshop for kids”.

Shannon’s restructuring of the company enabled it recently to turn in a small operating profit of £1.3m. Turnover for 2008 was £160m, leading chief executive David Carter-Johnson reportedly to say that the company was out of “intensive care”.

However, a sharp deterioration in trading, combined with overwhelming competition from supermarket chains, has left it unable to service all its debts. It is understood that pressure in recent weeks from a number of trade creditors pushed the company over the edge.

The chain owes £10m to Burdale, an arm of the Bank of Ireland, and just over £20m to Shannon, who owns 100% of the company’s shares. Both are expected to get most of their money back.

The company is expected to continue trading while it begins the search for a new owner. Any buyer is likely to reduce the number of stores by at least 20% and focus on its best-performing outlets. The company had already closed 42 branches before it was bought by Shannon.

As well as the Adams chain, the parent company also owns the Mini Mode children’s clothing brand designed for Boots and sold in 330 of the chemist’s UK stores. Boots and J Sainsbury, the supermarket chain, are regarded as possible buyers for the Adams brand.

News of Adams’s troubles comes days after three large retailers, Whittard, Officers Club and Zavvi, named in The Sunday Times the previous week as being on a “critical list”, slipped into administration.

Insolvency specialist Begbies Traynor has predicted the collapse of between 10 and 15 national retail chains by mid-January as the recession bites.

Last week, Seymour Pierce retail analyst Freddie George interviewed 22 large retailers and concluded: “It’s official — this will be the worst Christmas for many years . . . the weak sales trend and the intense discount activity will continue well beyond January 2009, and lead to a further step down in 2009/10 profit forecasts.”

Company Watch, the independent analysis firm, said it could identify 20 or more retailers that were extremely weak financially.

“Some of these we term ‘waterskiers’,” said chief executive Guenter Steinitz. “These are profitable companies with balance sheets that are severely stretched and are kept afloat only so long as they have sufficient continuing profitable sales pulling them along. As soon as that stops, they find themselves in deep water with no lifeline, and they’re gone.”

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