Mothercare shares plummet but firm nears completion of debt refinancing
Mothercare shares plummet but firm nears completion of debt refinancing
- The mother and baby products retailer entered into administration in 2019
- In the UK, it sells its goods such as baby clothes and toys through Boots
Mothercare shares plummeted on Friday after the embattled retailer swung to an annual loss.
However, the group told investors that it has nearly completed a refinancing of its debt pile, which became unmanageable after 14 consecutive Bank of England interest rate hikes.
The mother and baby products retailer is in discussions with a number of stakeholders and financing partners.
The Watford-based firm has endured a torrid few years, culminating in its UK division entering administration in 2019 amidst mounting losses and fierce competition from supermarket chains.
It is now run as a franchise business. In the UK, it sells its goods such as baby clothes, toys and bedding through Boots.
The Watford-based firm has endured a torrid few years, culminating in its UK division entering administration in 2019
Mothercare saw a 16 per cent decline in worldwide retail sales to £322.7million over the year to March, driving it to a a statutory loss of £100,000 for the year from a profit of £12.1million the prior year.
The decline was driven by challenges in its Middle Eastern markets, as well as its exit from Russia following the conflict in Ukraine.
Mothercare shares fell by 15.66 per cent to 3.50p in afternoon trading on Friday.
The London-listed business said that the pandemic had a big impact on the group with its franchise partners having to clear old inventory, reduce costs and lower the level of investment it can make in Mothercare.
Mothercare said: ‘This is likely to mean that the return to pre pandemic levels of trading will take longer and we are working with our partners to assist that recovery.’
It comes after the interest rate on its existing £19.5 million four-year loan facility shot up to 19.2 per cent. It stressed it does not need additional liquidity, but that it would be ‘preferable to accommodate business development and unanticipated challenges’.
The group is targeting an operating profit of £10million from its franchise operations.
Some 30 million babies are born each year across the globe, which presents opportunities for the brand, it said.
Mothercare added it is still not operating in eight of the top 10 markets in the world, ranked by wealth and birth rate.
Clive Whiley, Mothercare’s chairman, said: ‘We have a compelling market opportunity.
‘Mothercare remains in an unparalleled position of being a highly trusted British heritage brand, with a significant opportunity to leverage this brand equity and grow our global presence beyond our existing franchise network.’
In June, then Mothercare’s boss Daniel Le Vesconte resigned with immediate effect after less than five months in the job amid continued turmoil at the maternity products retailer.
Le Vesconte became chief executive in mid-January, making him the first person to hold the post since Mark Newton-Jones left in early 2020.
He arrived soon after the company declared a significant slump in half-year profits and revenues following its exit from Russia, where it earned between a fifth and a quarter of its global retail sales.
Whiley added: ‘There is still work to do, but we are excited about the future prospects for Mothercare as we leave behind the turmoil of recent years.’
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