The baby products business has become the latest in a string of retail brands to pursue a Company Voluntary Arrangement, announcing today that it intends to close 50 stores in a move that threatens 800 jobs.
No specific details have been revealed as to stores facing closure. Mothercare has 13 stores in the region: Manchester Fort, Crown Point Denton – which has already lost its M&S Outlet this year – Stockport, Macclesfield, Altrincham, Warrington, Blackburn, Prescot, Preston, Aintree Racecourse Retail Park, Bromborough, Chester and Llandudno.
As part of its restructuring, Mothercare has also arranged a refinancing package worth up to £113.5m, which includes £28m raised through issuing new shares, and an extension of its existing debt arrangements. The group hopes to renegotiate rents on 21 further stores as it seeks to make savings of £15m a year.
Interim executive chairman Clive Whiley said: “These measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally.
“The recent financial performance of the business, impacted in particular by a large number of legacy loss-making stores within the UK estate, has resulted in an unsustainable situation for the Mothercare brand, meaning the group was in clear need of an appropriate resolution.
“Since my appointment, my priority has been to galvanise support from all of our stakeholders and provide a solution to the short-term problems facing the company.
“These comprehensive measures provide a renewed and stable financial structure for the business and will drive a step change in Mothercare’s transformation. The potential for the Mothercare brand in the UK, benefitting from a restructured store estate, and internationally remains significant. However, there remains much to do and we must maintain a diciplined focus.”
The group also said that Mark Newton-Jones, the former Littlewoods chief executive who departed from that role at Mothercare while under the stewardship of previous chairman Alan Parker in April, will return to his post.
Mothercare currently trades from 137 UK stores but aims to reduce that to 78 by 2020, meaning a further nine stores would close beyond this initial programme.
The CVA will go to a creditors’ vote on 1 June. The stores are expected to close within a year.
Retailers that have had CVA proposals accepted by creditors this year include Carpetright in April, and New Look, which had its plan apprioved in March. House of Fraser is working with KPMG on a plan at present.
Creditors of restaurant groups Prezzo and Jamie’s Italian agreed CVAs in March and February respectively, while Poundworld has considered the option, but is now thought to be pursuing a trade sale. Toys R Us and Maplin went into administration in the first quarter of the year.