Mothercare has shared details of its new business model. The update comes following discussions with its internal franchise and manufacturing partners to modernise and improve its commercial relationships to mutual benefit, with the objective of improving pricing and quality for our franchise partners and reducing financial and operational risk for our manufacturing partners. The retailer has said that its new business model is “more sustainable and less capital-intensive” and will come into effect from AW20.
Mothercare’s new model results in its franchise partners contracting to pay for products directly to its manufacturing partners. It says that this will help remove the timing mismatch it was experiencing with the reduction in its payment terms; this will help improve the Group’s working capital requirements. Mothercare has also said that it believes that this new way of working will also have the added benefits of improving pricing for franchise partners, which in turn should better incentivise retail sales growth and assist its manufacturing partners in reinstating credit insurance for future seasons.
The firm has also confirmed that the terms of its franchise deal with Boots have now been agreed for the appointment of Boots as its UK and Republic of Ireland franchise partner. This will be for an initial period of ten years.
Mothercare branded clothing will be available in a large number of Boots stores across the UK and Ireland from this autumn with home and travel products (including pushchairs and car seats) available in larger Boots stores, as well as online at www.boots.com.
The group also revealed that it has entered into a new twenty-year franchise agreement with the Alshaya Group, its most significant franchise partner.
However, Mothercare said that it still expects to take a £10m hit from the UK stores administration last November.