Mothercare pushes ahead with closures as profit slides

● Proposed move would see 50 stores given the chop ● On adjusted basis, profits fall 88.3% to £ 2.3m

Mothercare is to swing the axe on 50 underperforming stores and re- hire the chief executive it sacked just weeks ago as part of a wide- ranging shake- up.

The closures, which will result in hundreds of job losses, will be carried out through a company voluntary arrangement ( CVA) – a move which allows companies to close loss- making shops and secure rental discounts. Mothercare employs about 3,000 people across 137 outlets.

In a move that will stun many industry observers, Mark Newton Jones, who was given the elbow as chief executive last month, will return to the fold and once again take the top job.

It is understood he was brought back at the behest of chairman Clive Whiley, himself brought in recently to replace Alan Parker.

Them an that had been brought in to replace Newton Jones, David Wood, will now become managing director.

As part of the restructuring, Mothercare also announced a refinancing package worth up to £ 113.5 million. It comprises £ 28m through an equity capital raising, an extension of its existing debt to £ 67.5m and £18 min shareholder and trade partner loans.

Among the latter figure is a £ 2m loan from Beano publisher DC Thomson.

Whiley said the drastic measures provide a “renewed and stable financial structure for the business” and will drive a “step change” in Mothercare’s transformation.

The shake-up comes alongside a brutal set of annual results. Mother care swung to a £ 72.8m pre- tax loss in the year to 24 March, which compares with a£7.1m profit in 2017.

On an adjusted basis, pre- tax profits plummeted 88.3 p er cent to just £ 2.3m.

Wood said :“The business saw a softening in the UK market from the end of September onwards with store sales down for much of the second half.

“International markets remained challenging during the year, with a number of key markets under performing, although the return to moderate growth in the Middle East towards the end of the year is encouraging.”

Jim Tucker, a partner at KPMG and a proposed supervisor of the CVA, said: “For over 50 years, Mothercare has been one of the UK’S most trusted brands. But like many other traditional retailers, in recent years [ it] has been adversely affected by the consumer shift to online shopping.

“As seen with similar successful CVAS, this proposal is one facet of a wider financial and operational restructuring plan.

“If approved, and with the support of the company’ s lenders, shareholders and landlords, the business will be able to move for ward across a smaller, more profitable estate, with a business model more suited to today’s multichannel retail environment.”