Maternity and baby retailer Mothercare has confirmed it will close 50 stores and, in a surprise move, has re-hired its former CEO Mark Newton-Jones just six weeks after he left the business.
Newton-Jones was removed from the business by chairman who has since left the business himself to be replaced by interim executive chairman Clive Whiley.
Upon his return Newton-Jones faces the unenviable, but necessary, task of implementing a bold restructuring plan that involves the closure of more than a third of its 137 stores and seeking rent reductions on a further 21 stores as part of Company Voluntary Arrangement.
By the end of 2020 Mothercare says it expects to have 78 stores in operation and in the process it will shed around 800 jobs.
The measures will be backed up by a refinancing programme that will provide £113.5m of funding including: £28m from a proposed equity capital raising in July of this year, revised committed debt facilities of £67.5m, new shareholder loans of £8m, and a new debtor backed facility of up to £10m from one of the company’s trade partners.
Whiley said of the plan: “The recent financial performance of the business, impacted in particular by a large number of legacy loss making stores within the UK estate, has resulted in an unsustainable situation for the Mothercare brand, meaning the Group was in clear need of an appropriate resolution. Since my appointment as Interim Executive Chairman, my priority has been to galvanise support from all of our stakeholders and provide a solution to the short-term problems facing the Company.”
“These comprehensive measures provide a renewed and stable financial structure for the business and will drive a step change in Mothercare’s transformation. 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,” he added.
Further details of the return of Mark Newton-Jones will be released in a further announcement but Whiley said of his return. “Mark Newton-Jones has agreed to return as Chief Executive Officer (subject to execution of contract, further details of which will be included in a separate announcement in due course) alongside David Wood becoming Group Managing Director. Both will be members of the Mothercare plc Board. In my view, alongside Glyn Hughes’ strong performance as Chief Financial Officer, this provides us with a first-class Executive team to ensure implementation of the transformational tasks ahead of us.”
Mothercare is the latest in a string of high street retailers to seek a CVA. New Look and Select are both trading under CVAs while House of Fraser is negotiating a proposed CVA deal with its creditors. The spate of the arrangements reflect the tough trading conditions and increasing costs faced by larger retailers with a large, and expensive, store estate.