Mothercare is set to shut down 50 of its underperforming stores and bring back recently-ousted chief executive Mark Newton-Jones as part of a major rescue plan unveiled today.
As part of its now-confirmed company voluntary arrangement (CVA), the closures will result in around 800 job losses.
In the UK, Mothercare employs about 3000 people across 137 stores.
Also part of the CVA is the return of Newton-Jones, the chief executive of four years who was pushed out of the role just 36 days ago following poor Christmas trading and a profits warning.
The man that had been parachuted in to replace him, David Wood, will now become Mothercare’s managing director.
The babywear and maternity retailer also announced a refinancing package worth up to £113.5 million as part of the CVA.
It comprises £28 million through an equity capital raising, an extension of its existing debt to £67.5 million, £18 million in shareholder, and trade partner loans.
“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,” chairman Clive Whiley said.
“These comprehensive measures provide a renewed and stable financial structure for the business and will drive a step change in Mothercare’s transformation.
“These measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally.”
According to sources speaking to Sky News, Whiley – a turnaround specialist who joined Mothercare as interim executive chairman a month ago – played a key role in bringing elements of the CVA together.
Mothercare has already reduced its UK store portfolio from 220 stores to 137 over the past four years. A decade ago it had 400.
It also initially planned to bring it down to 92 outlets by 2023, but the CVA indicates it will now accelerate its closure plans and aim for 73 stores by 2022.
Mothercare’s CVA, which will need approval from its creditors. One, the Pension Protection Fund, has already indicated it would vote in favour.
Mothercare shares closed on Wednesday at 21.3p, valuing the retailer at just £36.5 million.
A CVA is a form of insolvency that allows retailers to shut loss-making stores, reduce rents and cut costs in a bid to keep the business in operation and avoid administration.
Several retailers – including household names New Look, Select and Carpetright have launched CVAs this year as a result of weak consumer confidence and rising costs due to Brexit-fuelled inflation.
Analysts predict more this year, such as House of Fraser’s confirmed CVA to be unveiled in June.
CVAs, along with the collapse of Toys R Us’ UK arm and Maplin, have left in their wake hundreds of vacant properties on the high street and a trail of job losses.