Mothercare takes axe to store portfolio as CVA announced

Mothercare has become the latest retailer to green light a company voluntary agreement (CVA), following the likes of New LookCarpetright and Toys R Us UK down this route.

The CVA will be overseen by KPMG and will involve the closure of 50 stores, more than one-third of its 137 UK portfolio, triggering hundreds of job cuts (exact numbers are not known at this point). A comprehensive debt and equity refinancing is also on the cards (further details on which can be found here).

In another surprise move, Mothercare has reappointed Mark Newton-Jones, the chief executive who was sacked last month after a big fall in sales over the Christmas trading period and a profits warning. The decision to show him the door had been made under the watch of chairman Alan Parker, who has since stepped down.

Catherine Shuttleworth, CEO, Savvy, observes that the interim executive chairman, restructuring specialist Clive Whiley, needs someone in charge who has a clear view of the business. "That’s understandable and probably a move of immense pragmatism. But it’s yet another embarrassing blunder by Mothercare, making the wrong decision at the wrong time for the business. The colleagues in head office and in stores whose jobs are now at risk must be watching on with a mixture of disbelief and fury," she states.

The retailer, meanwhile, stresses that its recent financial performance, impacted in particular by a large number of legacy loss making stores within the UK estate, has resulted in an unsustainable situation. "Since my appointment, my priority has been to galvanise support from all of our stakeholders and provide a solution to the short-term problems facing the company," says Whiley.

He continues: "The potential for the Mothercare brand in the UK, benefitting from a restructured store estate, and internationally remains significant. However, there remains much to do and we must maintain a disciplined focus on cost control and cash generation throughout the business, but these measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally."