Irish Mothercare unaffected as 50 UK stores to shut
The company that operates the Mothercare brand in Ireland says shops here won't be affected, after the struggling British retailer said it will close over a third of its stores there.
The UK business yesterday announced the return of the chief executive who was sacked just five weeks ago.
Sales and profit in the UK have been hammered by intense competition from supermarket groups and online retailers as well as by rising costs, resulting in what it called "a perilous financial condition".
Mothercare's shares had lost 83pc of their value over the last year but rose as much as 34pc yesterday after it detailed a £113.5m (€130m) refinancing, including a planned £28m equity fundraising, and said Mark Newton-Jones would return as CEO.
Newton-Jones was ousted as CEO on April 4 by then chairman Alan Parker. Parker himself abruptly retired on April 19.
Newton-Jones's replacement as CEO - former Tesco executive David Wood - will become group managing director.
Mothercare said it would seek creditor approval for so-called company voluntary arrangement (CVA) proposals that would enable it to shut 50 stores and secure rent reductions on 21 others. As many as 800 jobs could be lost. In Ireland a separate business has the right to trade under the Mothercare brand. Mothercare Ireland is a separately owned and family-run business, started by David Ward in 1992 and is now run by his two sons, Jonathan and Ben, and daughter Laura.
Managing director Jonathan Ward said the UK developments will have no impact here.
"Mothercare UK have this morning released their refinancing and UK store restructuring plan," Mr Ward said.
"Mothercare Ireland is a completely separate company and, as a result, our 15 Irish stores are unaffected by any plans in the proposal and will continue to trade as normal."
Mothercare Ireland is one of the original partners of the Mothercare International Group, and is currently the fifth-largest partner in the world.
The Irish business exited an examinership in October 2015 that resulted in three stores being closed at Blackrock and Jervis Street in Dublin and Cruises Street in Limerick and significant rental reductions being achieved.
Earlier this year, the directors of the Irish business said it had achieved a significant turnaround last year.
That was after new accounts for Mothercare Ireland show that the company recorded pre-tax profits of €488,711 in the 12 months to March 26, 2017 last.
In the UK, Mothercare trades from 137 UK stores, down from nearly 400 a decade ago. The new plan would see it trade from 78 UK stores by 2020.
The CVA route, which allows firms to avoid insolvency or administration, has been taken this year by fellow UK retail strugglers - fashion chain New Look, floor coverings group Carpetright and department store group House of Fraser.
Brutal trading conditions for store groups - with pressure on UK disposable incomes compounding intense competition - are also partly responsible for the collapse of Toys R Us UK, electricals group Maplin and drinks wholesaler Conviviality.
Shares in Mothercare were up 5.4 pence at 25.4 pence each by yesterday afternoon, valuing the business at £46m.
"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 ... meaning the group was in clear need of an appropriate resolution," said interim executive chairman Clive Whiley.
Analysts at Peel Hunt said Mothercare's measures looked sufficient to get the UK business back to breakeven.
Additional reporting Reuters