Mothercare may look to offload some or all of its UK store operations after another poor quarter saw sales continue on a downward trend.
Sky News yesterday reported that the group had kicked off talks with third parties about a sale or franchise arrangement for its stores in the UK.
Today, as part of the nursery retailer’s first-quarter earnings report, Mark Newton-Jones, the Mothercare CEO who was axed in April but rejoined the company one month later, indicated a part or full sale could be on the cards.
He said the retailer was “evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise”.
The news follows its sale of Early Learning Centre to The Entertainer in March this year. Gary Grant’s toy retail empire purchased the high street staple for £13.5m, £2m in the form of a performance-based earn out fee.
More than 50 stores have closed as part of the CVA agreement passed by lenders and landlords last year. A streamlined estate of 79 locations – down from 134 last year – has helped to cut costs and free up cash – but it led to a 23 per cent drop in total UK sales compared to last year’s first quarter.
Newton-Jones said the group had “observed a lower than expected transfer of sales following the CVA store closure programme” – and online had failed to pick up the slack or supplant closed stores.
Online sales also took a double-digit hit, hurt directly by reduced bricks and mortar presence due to fewer dot-com orders placed through staff assistance on in-store iPads. Overall, online sales are down 12.1 per cent.
Investments to boost Mothercare internationally didn’t pay off this quarter either, as overseas sales dipped 2.1 per cent. The group trades from around 1000 stores in about 50 countries.
"The process of restructuring and rebuilding a sustainable business continues, and we have in place financing plans to support these actions as we aim to be bank-debt free by the end of the year,” Newton-Jones added. “Our immediate priority is to complete the transformation of the business with a near-term focus on evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise.”