Struggling nursery and maternity retailer Mothercare has announced that its restructuring plans will include the closure of 50 stores and the return of former chief executive Mark Newton-Jones, who left the company in April.
In a much-anticipated statement, released this morning, the company said it would be ‘restructring its UK store portfolio through company voluntary arrangements’ (CVA).
It is hoped that these measures will allow Mothercare to return to a more stable footing and help it secure a viable and sustainable future.
Mothercare’s refinancing arrangement is expected to secure £113.5m in new funds to support the business. New shares will be issued in July and are expected to raise £28m, while it has also secured new debt facilities of £67.5m from its current lenders (HSBC and Barclays). Mothercare will also borrowing £8m from current shareholders and £10m from an as-yet-unnamed ‘trade partner’.
Under the terms of the company voluntary arrangement, Mothercare will also be asking landlords and other creditors to reduce rent bills on a further 21 stores. The company is aiming to save up to £15m a year in costs, hinting at the possibility of further job losses.
While 50 stores are expected to close within a year, the total store portfolio is expected to reduce further over time – to 78 sites by 2020, down from 137 today.
“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,” said interim executive chairman Clive Whiley.
“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.”
The chairman’s statement also announced that Mark Newton-Jones, who was ousted in April, would now be returning as ceo to lead the business, while David Wood will become group managing director. Further details will be announced shortly.
Mothercare’s share price shot up 23% this morning, following the announcement.