Mark Newton-Jones, Mothercare’s new chief executive, is to invest £400,000 in the company’s planned £100m rights issue.
Newton-Jones said the entire board and executive team had committed to taking up shares in the rights issue which will fund the closure of loss-making stores as well as IT investments and debt repayments.
Newton-Jones said Mothercare would become a “digital first” retailer, with iPads and interactive screens in stores so that shoppers could view demo videos and customer reviews and access a broader product range on the high street.
Mothercare has already shut 153 unprofitable stores with 50-75 more branches to follow. The closures will include almost all Early Learning Centre stores, although the brand will continue to produce toys for sale online and in 120 departments in Mothercare shops. Newton-Jones said staff were being transferred to nearby branches to help improve service while up to 20 new stores or relocations in the UK are planned.
The retailer is also introducing higher quality products. It will spend £20m on refurbishing all its branches and £10m improving computer systems in the hope of increasing online sales from 30% to 50%. It will use £40m of the money it is raising to pay off debt.
Mothercare launched the rights issue, which will net £95m after advisers’ fees, two months after rejecting a £266m takeover approach from Destination Maternity of the US. Big shareholders backed the decision even though Mothercare has struggled in recent years. Now the group is asking investors to back its own plan. The rights issue offers existing shareholders new shares at 125p each, a 34.2% discount to Monday’s closing price. It is fully underwritten by Numis, HSBC and JP Morgan Cazenove.
Under Newton-Jones, UK store sales have started to improve with like-for-like revenues up nearly 1% in the 15 weeks to 12 July.