Mothercare UK collapses putting 2,500 jobs at risk

Sajid Shaikh
Digital finance editor
Mothercare is to shut all of its 79 stores in the UK. Photo: Tolga Akmen/ AFP/Getty

Mothercare (MTC.L) has become the latest UK high street retailer to collapse as it appointed administrators for its UK operations on Monday putting 2,500 jobs at risk.

The struggling retailer will shut all 79 stores in the UK, however its overseas business remains unaffected.

In the UK the company lost over £36m last year. It had already closed a third of its British stores over the past year through a company voluntary arrangement (CVA).

On Monday the company confirmed it has announced “notices of intent to appoint administrators to the company's active trading subsidiary, Mothercare UK Limited and Mothercare Business Services Limited ("MBS"), which provides certain services to Mothercare UK, in the court today.”

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It further said: “This financial year's key strategic aim was to progress the next phase of our transformation of the group's business. This comprised two key and related elements. First, to secure a financial structure for the whole of the Mothercare Group which maintains a sustainable business model with a capacity to secure future growth. Second, to evolve, adapt and optimise the structure, format and model for our UK retail operations.”

The company runs a global business generating over £500m of revenues each year from over 1,000 stores internationally in over 40 territories.

However, in the financial year ended March 2019, the UK retail operations lost £36.3m despite making £28.3m profit internationally.

The company said since May 2018 it has 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 UK retail business.

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“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 ... as it currently stands and/or attractive enough for a third party partner to operate on an arm's length basis.

“The company is unable to continue to satisfy the ongoing cash needs of Mothercare UK. Plans [for restructuring and refinancing] are well advanced and being finalised for execution imminently. A further announcement will be made in due course.”

Rebecca Long Bailey, shadow minister for Business, Energy and Industrial Strategy (BEIS), said: “Mothercare disappearing from our high streets would be a huge loss to the new parents who rely on it and the thousands of workers whose jobs are at risk.

“The government must urgently meet with unions and the company to safeguard these jobs.”

Frank Ofonagoro, director at business advisory firm Quantum, said: "Mothercare has been struggling for a while with the now commonly understood factors that have been hitting legacy UK high street operators. An outdated business model has meant the company has been far too slow in migrating its operating model away from costly physical stores to a much leaner online model.

"Furthermore, Morthercare has been unable to find an effective response to the changing buying habits of the new breed of millennial parents.”

Mothercare floated in 1972 and has been a mainstay of the British high street for many years. However its UK business has been unprofitable for more than a decade and failed to find any buyers.