Hamleys has swung to a full-year loss in what chief executive Ralph Cunningham described as “one of the most challenging years in UK retail history”.

The toy retailer posted a pre-tax loss of £12m in the year to December 31 2017, from a pre-tax profit of £2.6m the previous year.

It attributed its full-year loss to market conditions and the implementation of its transformation plan, which hinges on expanding its travel and international franchise store network, refocusing its customer proposition and “significant cost reductions and productivity improvements in head office”.

Hamleys recorded a 2.5% fall in revenue in the year to £66.3m, exacerbated by the exit of loss-making stores and franchises across the UK and Ireland, and ceasing trading in Sweden, Norway and Denmark.

The toys specialist ended the period with 129 outlets comprising 29 stores and 100 franchise units, and closed six stores and four franchises respectively.

Cunningham said: “While our international franchise business experienced good growth, last year was one of the most challenging years in UK retail history.

“Hamleys was not immune to the impact of Brexit uncertainty, macroeconomic pressures, a general erosion in UK consumer confidence and falling customer footfall due to the threat of terrorism.

“Our results for 2017 reflect these market pressures and the one-off impacts of the fundamental strategic review of the business undertaken by our new management team in the fourth quarter of 2017.

“However, 2017 is now behind us and our transformation plan is well on course to return the business to profitability. We have made substantial improvements to strengthen and consolidate our business, with an unwavering focus on improving profit, cash and sales.”

In its financial year to date the retailer has recorded a 2.7% increase in like-for-like sales and said it is on track to “return to net profitability in the next 12 months”.

The retailer plans to open three new travel stores in the UK during the year as well as franchise outlets in Japan.