Mothercare has laid bare its financial struggles in its annual report just hours after launching a CVA, with a woeful performance in the UK dragging its profit into the red.
The babywear and maternity retailer swung to a £72.8 million pre-tax loss in its fiscal year ending March 24, compared to a £7.1 million profit in 2016/17.
On an adjusted basis, pre-tax profit plunged 88.3 per cent year-on-year from £19.7 million down to a mere £2.3 million, although this is in line with guidance given in January.
Mothercare said this loss came about from a raft of restructuring and closure costs, as well as store asset impairments and onerous leases.
Meanwhile, total sales fell 1.9 per cent to £654.5 million and net debt was lower at £44.1 million.
The figures were revealed just hours after Mothercare launched a company voluntary arrangement (CVA), which includes plans to shutter 50 stores and slash around 800 jobs as part of a wide-ranging restructure to keep the business afloat.
The CVA also includes plans to re-instate former chief executive Mark Newton-Jones to the helm just five weeks after he was ousted by the board.
Mothercare’s overall full year figures were impacted by a woeful performance in the UK, namely a -717.1 per cent year-on-year crash in loss before tax after adjusted items from -£9.7 million to -£79.4 million
Adjusted UK operating loss also plunged -353.1 per cent year-on-year from -£4.4 million to -£19.8 million.
On the other hand, total UK sales fell 4.8 per cent year-on-year to £437.6 million, while UK like-for-likes dropped 1.3 per cent compared to the growth of 1.1 per cent recorded in the previous financial year.
Mothercare said it had a positive first six months in the UK, but then it became “very difficult” in the second half with sales impacted by the “softening of store footfall and margin impacted by higher level of discounting to stimulate sales”.
However, online sales growth continued and now accounted for 43 per cent of total UK sales.
Mothercare’s international figures looked healthier, although there were still lots of decline.
International like-for-likes fell 5.9 per cent, while total international sales dropped 4.9 per cent to £725.3 million.
The retailer said its adjusted international operating profit fell 4.9 per cent to £33.6 million, but international profit before tax after adjusted items actually grew 10.9 per cent to £28.4 million.
“The business has modernised significantly over recent years, but we expect the changing dynamics and challenges in the retail sector to continue, so we need to move faster with the execution of our transformation plans,” said David Wood, the current chief executive who will be relegated to managing director upon Newton-Jones’ return to the helm.
“In the last few months we have been holding discussions with our lenders and other financing partners in order to set the business on a firmer financial footing to continue this transformation.
“As a result of this, we are also announcing today an accelerated and major restructuring of our store estate, alongside a refinancing which will secure the funding required to ensure a sustainable and successful future for Mothercare.”
“These plans have the support of all key stakeholders and we are confident we can use this platform to rebuild a specialist proposition that meets the needs of our parenting communities.”