British baby goods retailer Mothercare has called in administrators after business revealed it was in trouble earlier this year, putting 2,500 jobs at risk. There will be a phased closure of all of its 79 UK stores, administrators from PricewaterhouseCoopers (PwC) said. Mothercare “has been loss making for a number of years”, said PwC said, although international franchises remain profitable.
In a statement it was revealed that Zelf Hussain, Toby Banfield and David Baxendale of PwC LLP have been appointed as administrators to the Company’s active trading subsidiary, Mothercare UK Limited and to Mothercare Business Services Limited with effect from today, 5 November 2019.
The statement said: “It has become clear that the UK Retail operations of the [Mothercare] 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.
“Furthermore, the Company is unable to continue to satisfy the ongoing cash needs of Mothercare UK”
Having taken legal advice, the directors of Mothercare UK and MBA decided that there was no reasonable alternatives but to appoint administrators.
The Administrators’ primary responsibility will now be to establish the liabilities of Mothercare UK and MBS and to realise their assets (convert items of property into cash) in order to make a distribution to creditors.
It has been revealed that the board of the company is in close contact with the administrators regarding the administration processes and is finalising agreements with various stakeholders to secure additional financing to underpin the next steps to preserve the group’s financial position and future as a solvent group.
It is expected that Mothercare’s shares will remain admitted to the Official List and to trading on the Main Market of the London Stock Exchange, as the company has sufficient cash resources to meet its current operating requirements.
Clive Whiley, Chairman of Mothercare commented: “It is with deep regret and sadness that we have been unable to avoid the administration of Mothercare UK and Mothercare Business Services, and we fully understand the significant impact on those UK colleagues and business partners who are affected.
“However, the Board concluded that the administration processes serve the wider interests of ensuring a sustainable future for the Company, including the wider Group’s global colleagues, its pension fund, lenders and other stakeholders.
“The UK high street is facing a near existential problem with intensifying and compounding pressures across numerous fronts, most notably the high levels of rent and rates and the continuing shifts in consumer behaviour from high street to online.
“Mothercare UK is far from immune to these headwinds despite the strength of the Mothercare brand, its exclusive and quality product range and recognised customer service.
“Despite the changes implemented over the last 18 months, contributing to a significant reduction in net debt over the same period, Mothercare UK continues to consume cash on an unsustainable basis.
“The action announced today has been carefully thought through and without it, the existence of the wider Group would be threatened.
“We know it is right for the wider Group to ensure that Mothercare remains the leading global brand for parents and young children with a bright and solvent future within the international franchise business.”
A further announcement will be made in due course.
Salman Haqqi, personal finance expert at money.co.uk, says:
“After many months of speculation, the fears of Mothercare’s thousands of UK staff and loyal customers have been realised.
“It’s sad but not surprising news, as they are one of the many household high street brands that have struggled to make ends meet in the current retail climate.
“This will be distressing news for employees of Mothercare and their families especially so close to Christmas. Now is the time to check what redundancy rights you have and dig out any income or mortgage protection policies you hold.
“There’s been no announcement as to whether or not Mothercare will honour gift vouchers and refunds. It isn’t illegal for them to refuse refunds so if you were hoping to return any goods you may be in for a lengthy battle to get your money back.”
Employees worried about their redundancy rights should read the money.co.uk guide for more information: https://www.money.co.uk/guides/your-redundancy-rights.htm
For customers worried about their rights now that Mothercare has gone into administration should read the money.co.uk guide for more information: https://www.money.co.uk/guides/your-rights-if-a-retailer-goes-into-administration.htm