Mothercare stores headed for UK administration, global business to continue
It could be game over for Mothercare in its current form on the UK high street with the company having given notice that it will appoint administrators to its British retail business.
The company, which has 2,500 UK employees, will call in administrators for Mothercare UK and Mothercare Business Services (MBS) but the two units will continue to trade for now.
While employee numbers are in the thousands, the administration filing won't be quite as devastating as it would have been a couple of years ago as the company now has only 79 shops in the UK, having closed more than 50 of them already.
The company said that: “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 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.”
But this doesn't actually mean the end of Mothercare. As mentioned, the company has been trying to sell its UK operation and this process could continue. It's unclear whether the company could find any takers for its UK business, which would be operated as a franchise unit in the same way as the international shops are. There have been no takers so far, although it could be that an administration process that allows the company to exit leases without any penalties might make it more attractive.
The listed parent company should continue to operate and is in talks about refinancing. In addition to the relatively small number of UK stores, it operates a successful global brand business with more than 1,000 franchised stores internationally and that part of the operation is profitable. In fact, in the year to the end of March, its international profits added up to more than £28 million, although this profit was wiped out by the fact that the UK retail operation lost more than £36 million.
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