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Mothercare to appoint administrators for UK business

Baby and parent products retailer Mothercare has today (4 November) announced its intention to appoint administrators for its UK business.

At the time of the Mothercare group’s final results in May, the retailer said it was looking to put the structure in place for the next form of its transformation. And that appears to be one without a presence in the UK, with the division experiencing a £36.3 million loss in the 12 months to 30 March 2019 having been beset by challenges over the last decade.

The group wants to find a suitable financial structure and sustainable business model which can grow in years to come. The decision has been made to focus on its successful global brand business, which generates over £500 million in revenue annually.

Mothercare’s international arm operates over 1,000 stores in more than 40 territories, generating £28.3 million in profit in the last financial year.

Mothercare Business Services (MBS), which provides certain services to Mothercare UK, is also set to enter administration as part of the notice of intention being filed in court today.

The group, Mothercare UK’s 79 stores and MBS will be free to continue to trade “in the normal course of business” until further notice, but today's decision puts around 2,500 jobs at risk.

A statement from the retailer today 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 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.”

It added that the company is “unable to continue to satisfy the ongoing cash needs of Mothercare UK”.

Mothercare UK’s spiralling sales have been a common feature in the group’s trading statements over the last few years, but senior management continued to plan for a more multichannel future in the hope the business could modernise for the digital age.

It appears a final straw for the UK operation was a downturn in online sales, reported in the last financial year. In a UK eCommerce market that continues to grow, Mothercare’s failing digital sales were a significant concern.

In May, the company reported an 8% year-on-year decline in online sales for the full-year, with the slump to £140.1 million attributed to the loss of iPad-generated sales in store as a result of shop closures and the consequent slowdown in interest from online shoppers living close to these premises.

Mothercare also said at the time it had cut marketing and engineering investment in online and apps, which reduced traffic performance of its digital platforms.