Maternity retailer Mothercare has placed its UK business into administration as it seeks to protect its profitable international business.
In a statement, signed by CEO Mark Newton-Jones the company said that in the financial year March, the brand generated profits of £28.3 million internationally whereas the UK retail operations lost £36.3 million.
“The company operates a successful global brand business generating over £500 million of revenues each year from over 1000 stores internationally in over 40 territories. The company’s primary objective has been to seek to preserve value for as many stakeholders as possible, as we strive to optimise the level of sustainable long-term revenues for the group going into the 2021 financial year and beyond.”
Mothercare operates under partnerships or licences in Hong Kong, Malaysia, Singapore and Brunei.
Mothercare plc has appointed PWC as administrators to Mothercare UK and Mothercare Business Services Limited which provides services to Mothercare UK. All 79 stores in the UK will close down and about 2500 jobs will be axed.
“Since May 2018, we have undertaken a root and branch review of the group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK retail business,” said Newton-Jones. “Through this process, it has become clear that the UK Retail operations of the group, which today includes 79 stores, are not capable of returning to a level of structural profitability and returns that are sustainable for the group as it currently stands and/or attractive enough for a third party partner to operate on an arm’s length basis. Furthermore, the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK.”
Retail Gazette reports that last week the company appointed KPMG to advise on its options following the failure of talks with third parties. That followed a Company Voluntary Arrangement in June of last year which saw 55 UK stores closed.
Sofie Willmott, lead retail analyst at GlobalData, said Mothercare’s fall into administration comes as no surprise following its prolonged poor UK performance.
“The retailer has failed to stand out as a specialist destination with new parents turning to competitors that offer a better proposition either in terms of low prices, convenience or service, such as Amazon and John Lewis,” she said.
“Its strategy to cull store numbers in recent years and transfer sales online has proved unsuccessful, with digital sales declining as its online offer failed to encourage purchases.”