Mothercare set to accelerate store closures

Mothercare store closures

Mothercare is poised to speed up store closures in order to secure the fresh funds it desperately needs from investors, as it edges closer to finalising a rescue plan.

The news comes after retailer confirmed with The Telegraph that it would launch an equity fund raise with investors as part of a restructuring and refinancing package that will be unveiled alongside its full-year results on Thursday.

Analysts have predicted that Mothercare – which has already reduced its UK portfolio from 220 stores to 137 over the past four years – will reveal a 95 per cent drop in annual profits.

It is believed that its restructuring strategy would come in the form of a company voluntary arrangement (CVA), and The Telegraph reports this would include plans to slash its store estate from 137 down to target of between 80 to 100.

The store closures are also expected to lead to the loss of hundreds of jobs.

In a stock market announcement yesterday, Mothercare said it was “finalising a comprehensive restructuring and refinancing package to put the business on a stable and sustainable financial footing”.

News of childrenswear and maternity retailer’s dire financial situation first emerged late last year and since then its share prices have plummeted.

Along with parachuting in new chief executive David Wood after pushing out Mark Newton-Jones, Mothercare has enlisted the help of KPMG to help it secure more funding from its lenders HSBC and Barclays, as well as Rothschild to secure further funding from other sources.

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.

Click here to sign up to Retail Gazette‘s free daily email newsletter


Please enter your comment!
Please enter your name here