What do you need to know about their administration?

Mothercare has announced that it is calling in administrators after losing £36.3m in the previous financial year. Growing bills from rents, minimum wage rules and business rates have increased the outgoings of the company’s remaining 79 UK stores employing 2,500 full and part time staff. 

The company was already in a CVA process and had previously closed 55 loss-making stores and sold its Early Learning Centre brand in an attempt to return to solvency. 

The company said: “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. 

“Through this process, it has become clear that the UK Retail operations of the group, which 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.”

The administration only affects its UK stores and business services division, the company has 1000 stores in 40 overseas countries operating on a franchise basis. 

The parenting sector itself has seen something of a decline with rivals Mamas and Papas posting a £2.38m loss for the second consecutive year earlier in 2019. 

Empty nest

Chris Horner, Insolvency Director with BusinessRescueExpert said: “Sadly, today’s news isn’t a surprise for business and financial news watchers. It also looks unlikely that someone could come along and buy the brand in its entirety without looking to make further cost-cutting measures across the board.

“Large, out-of-town, retail units have fallen out of fashion as dramatically as online purchasing and delivery has increased.”

“The evidence shows that parents, friends and relatives are no longer willing to pay a premium for baby and toddler clothes, toys and equipment which realistically will only have a year’s use. 

“People can find the same products online for a cheaper price and don’t have to visit the store physically, which can be a difficult juggling act for new parents.

We’ve previously written about why CVAs are such a popular option for retailers in financial difficulties and what leverage landlords have in the process.

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