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Mothercare to close 111 UK stores

Mothercare, the struggling mother and baby products retailer, is to close 111 of its UK stores over the next three years. The move will put 730 jobs at risk.


Mothercare to close 111 UK stores

Mothercare, the struggling mother and baby products retailer, is to close 111 of its UK stores over the next three years. The move will put 730 jobs at risk.

The retailer announced plans to cut the number of UK stores from 311 to 200, which includes 36 Mothercare and 75 Early Learning Centre stores, after several months of poor trading.

The announcement came as the group revealed that its fourth quarter like-for-like sales in the UK fell 8.2% year-on-year. Total group sales in the 12 weeks to 31 March were down 4.2% compared to a third quarter fall of 1.2%. Mothercare blamed the fall partly on its decision to clear excess Christmas stock last year.

The group said it would now focus on its 200 profitable stores to offer mothers "improved value, competitive product ranges, and an enhanced customer service experience".

Mothercare said the group would become a "lean, more competitive business" as a result of the changes.  Alan Parker, executive chairman, said: "Mothercare is a great global brand with strong international partners. Today marks the beginning of a three-year turnaround and I am confident we will deliver a sustained recovery and long-term success."

The group said its inventory levels remained tightly controlled and UK stocks were 13% lower than last year. The disciplined approach to stock levels had resulted in an improved UK gross margin performance in the fourth quarter.

Worldwide network sales were up 4.5% year-on-year which was an improvement on the third quarter's rise of 3%. International sales increased by 18% following a 15% rise in the previous quarter.

During the year a net 134 stores were opened outside the UK including 27 in the Middle East, 20 in Europe, 76 in Asia-Pacific and 11 in Latin America. The total  number of stores outside of the UK now stands at 1,028 in 58 countries.

Mothercare also reported its full year results which showed that worldwide network sales rose 4.3% while total group sales were up 0.7%. In the UK total sales fell 6.3% while like-for-like sales decreased by 6.2%.

The group said it was  adjusting its overheads to fit the new smaller UK operating base and had identified savings in non-store overhead costs of at least £20 million on an annualised basis by March 2015. It had also  commenced consultation to reduce UK head office payroll costs by 16%, to bring about a more simplified and efficient central structure.

Mothercare said  it estimates  the cost of reducing the UK store portfolio to be £35 million.  As a result the group has agreed the refinancing of its banking facilities with HSBC and Barclays, increasing the level of committed facilities from £80 million to £90 million and extending the term to 31 May 2015.  The group said the facilities would strengthen the its financial position and provide additional liquidity and covenant headroom to accommodate the new three year strategy.

Parker said: "Today we have announced the framework of our decisive three year strategy to restore the UK business back to profit and strengthen our foundations for growth. This will see us operate a lean, more competitive business, focused on the existing profitable stores in a smaller UK portfolio, combined with a state of the art online platform. Our International business continues to perform strongly and we plan to further accelerate growth."

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