The baby goods retailer has signalled its intention to appoint administrators to its UK retail operation with its 79 stores “not capable of returning to a level of structural profitability and returns”.
In a stock market release this morning, the group said its retail stores across the country were “not attractive enough for a third party to operate”, and added it was “unable to continue to satisfy the ongoing cash needs of Mothercare UK”.
The group’s retail operation is spread across the UK; in the North West, it has stores in Manchester, Warrington, Aintree, Prescot, Preston, Bromborough, and Chester.
Mothercare had already agreed a company voluntary arrangement to allow it shut 55 shops. The move to appoint administrators puts around 2,500 jobs at risk, including 500 full-time and 2,000 part-time roles; if a buyer cannot be found, all 79 stores are likely to close, although the group said these would continue to trade as normal at present.
The group had been attempting to find a buyer for its loss-making UK retail arm but to no avail. While the wider group’s global brand generated £28.3m in profit in its most recent results, covering the year to 31 March 2019, its UK arm posted a loss of £36.3m.
The stock market release said: “The company’s primary objective has been to seek to preserve value for as many stakeholders as possible, as we strive to optimise the level of sustainable long-term revenues for the group going into FY21 and beyond.
“Since May 2018, we have undertaken a root and branch review of the group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK retail business.
“Through this process, it has become clear that the UK retail operations of the group, which today includes 79 stores, are not capable of returning to a level of structural profitability and returns that are sustainable for the Group as it currently stands and/or attractive enough for a third party partner to operate on an arm’s length basis. Furthermore, the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK.”