Mothercare has confirmed today that it plans to appoint administrators for its ailing UK retail subsidiary, which comprises of 79 stores.
The company emphasised that the wider publicly-listed group and its profitable overseas franchise business, which has more than 1,000 stores in over 40 countries, were not affected and will continue to trade as normal.
In the financial year ended March 2019, Mothercare’s UK retail operations lost £36.3m. Having carried out a CVA last year to close 55 stores, the retailer recently started negotiating with third parties about a sale or franchising agreement for its remaining 79 UK stores. However, it has failed to find a buyer despite discussions over the summer with a number of potential partners.
The group said today that through this process, it had become clear that its UK retail operation was not capable of returning to a level of structural profitability and returns that are sustainable for its business or a third-party partner. Mothercare added it was unable to continue to satisfy the “ongoing cash needs” of the UK unit.
The group stated that the UK administration filing was a “necessary step in the restructuring and refinancing of the group”, with its plans “well advanced and being finalised for execution imminently”. The shops will stay open until administrators have been appointed with the business then wound down.
The move follows a raft a retail failures and store closures in the UK this year with another 2,500 jobs now at risk from Mothercare’s plan.
Richard Lim, Chief Executive of consultancy Retail Economics, commented: “This is perhaps one of the most highly anticipated collapses on the high street. The retailer was already on life support having conducted a CVA last year. The cost-cutting operation and disposal of assets have not gone far enough to revive plummeting profits.
“Years of underinvestment in the online business and its inability to differentiate itself as a specialist for young families and expectant parents as been the root of its seemingly inevitable downfall. As competition has become fiercer they have been beaten on price, convenience and the overall customer experience.
“Put simply, they have been left behind in today’s rapidly evolving market and the board has been unable to restructure the business fast enough to cope with a new retail paradigm that has emerged.”
NAM Implications:
- Looks like end of story, folks.
- Hopefully, pro-active NAMs will have anticipated the incremental sales required to replace their UK Mothercare business…
- …and acted accordingly.
- NB. Given High Street pressures, it can be useful to re-assess the financial health of customers:
- Please see: When your customer goes bust
