Mothercare to close 60 stores, putting 900 jobs at risk – 100 more than previously announced – as it places its Children’s World subsidiary into administration.
The move comes after landlords rejected the company’s proposals for rent reductions for Children’s World stores last month. Mothercare will now close a total of 60 out of its 137 stores, 10 more than it said in May.
It expects to make annual savings of about £10m following the closures, and also plans to raise £32.5m from existing shareholders through a rights issue.
Clive Whiley, the group’s interim executive chairman, commented: “Whilst the lack of full approval for the Children’s World CVA was disappointing, we have now found a solution which allows us to go further and faster with the right-sizing of our store portfolio. We have also identified significant areas for further efficiencies and cost savings, which will underpin our return to a sustainable future. Notwithstanding the unavoidable impact the measures will have upon some of the group’s employees, we have to act with urgency to mitigate the headwinds being experienced by the UK retail sector as a whole.”
Mothercare has been hit by the problems facing traditional high street retailers, including a squeeze on consumer spending and the threat of online competition. But shoppers have also said the business was old fashioned and “fuddy-duddy”.
The Mothercare chief executive, Mark Newton-Jones, said the refinancing would help revitalise the business.
He commented: “We have seen an unprecedented period for UK retail and we have not been alone in facing a number of strong headwinds. I’m pleased to say however, that we are now in a position to refocus on our customers and improve the Mothercare brand both in the UK and across the globe. We have exciting plans ahead to revitalise the brand through enhancing our product ranges, improving our design and value, developing our digital and multichannel proposition and investing in our people.”
Mark added: “Our goal remains clear, to be the leading global specialist for parents and young children.”
Following news of the cash call, Mothercare shares slumped 9% to just 26p.