End of Mothercare?

Closure of 70 stores and re-financing agreement may not be enough

internetretailing.net

Mothercare to focus on the customer and multichannel after reaching agreement to close 60 stores

Mothercare says it is now in a position to focus on its customers and on revitalising its brand through multichannel retailing following the completion of its CVA and raising £32.5m to refinance the business. The nursery retailer also plans to improve the design and value of its products while at the same time investing in its people.

Mothercare, a Top50 retailer in IRUK research, expects to trade from a UK estate of 77 stores, as well as online, following the closure of 60 stores with the loss of around 900 jobs.

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A brief history of Mothercare

Mothercare opened its first store in 1961 in Surrey and was once considered a first stop for mums-to-be.

However, Stephen Springham, head of retail research at property consultancy Knight Frank, who has been following the company's progress for 20 years, says even in the late 1990s the brand wasn't doing particularly well.

"What's changed is the UK baby goods market has become much more competitive," he says.

"A host of other firms are offering products at lower prices and Mothercare's range feels a bit outdated."

When it comes to childrenswear Mothercare faces stiff competition from supermarkets that sell their own lines, such as Asda through its George range and Tesco through F&F.

Fashion retailers Primark and H&M also now have popular babywear ranges, while Amazon and Argos dominate the toys market.

Losing touch with mums, too many stores and online issues all appear to have added to the failing fortunes of the store.

The company initially sold pushchairs, nursery furniture and maternity clothing and later expanding its range to include clothing for children up to the age of five and later up to the age of eight.

It now offers a wide range of maternity and children's clothing, furniture and home furnishings, bedding, feeding, bathing, travel equipment and toys through its retail operations in the UK, and also operates internationally through franchises in Europe, the Middle East, Asia and Latin America.

The business started its mail order business in 1962. In 1972, Mothercare first became a public company, and in 1982 the company merged with the Habitat chain of retailers to form Habitat Mothercare plc.

In 1984, Mothercare began to expand internationally through entering into franchise arrangements with select partners in chosen countries. In 1986, Habitat Mothercare plc merged with British Home Stores plc. During the 1990s the merged group was rationalised.

In 2000, Mothercare became the sole brand and the holding company's name was changed to Mothercare plc.

In June 2007, the group acquired Chelsea Stores Holdings Limited, the owner of the Early Learning Centre brand.

The Early Learning Centre was founded in 1974 originally as a mail-order business offering toys and books with educational content. The first ELC retail store opened in Reading later the same year. In 1985, ELC was acquired by John Menzies plc who continued to expand the estate and ELC became a well-known high street brand. In September 2001, ELC was the subject of a management buyout, during which ELC streamlined its operations, exited non-profitable product categories and stores and grew its sourcing operation in Asia.

Prior to its acquisition by the Group, the Early Learning Centre business had expanded internationally in 1994, with the opening of the first store in Gibraltar. The Group has pursued further international expansion of the Early Learning Centre business through franchise agreements with select Franchise Partners in targeted markets.

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This is Money

Even with all the store closures, Mothercare looks extremely rattled

  • Mothercare is closing 60 stores through a CVA, leaving it with 77 UK shops

  • The loss-making business has also secured fresh funds to fund its rescue plan

  • Will its CVA be the silver bullet that brings Mothercare back from the brink?

Mothercare is just one of many High Street businesses currently pulling down the shutters on swathes of stores.

Like struggling retail counterparts Carpetright, New Look and House of Fraser, Mothercare hopes that store closures through a Company Voluntary Arrangement (CVA) - leading to reduced costs and rents - will give it the breathing room it needs to turn its fortunes around and return to profitability.

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