Mothercare: where did it all go wrong?

Mothercare is calling in administrators after revealing that its UK division is on the verge of collapse, putting up to 2,500 jobs at risk.

The maternity goods retailer announced on Monday that its UK stores were “not capable of returning to a level of structural profitability and returns that are sustainable for the group”.

It added: “Furthermore, the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK.”

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Sky News reports that Mothercare has 79 stores in the UK - a number that has been “substantially reduced following several efforts to save the loss-making operation”.

The company, one of many high street chains to have been hit by financial woes, shut 55 shops last year and suffered a £36.9m loss in the financial year to March.

Julie Palmer, partner at corporate recovery firm Begbies Traynor, said Mothercare had become “a byword for trouble on the High Street”, demonstrating “the failure of well-established brands to stay afloat”, reports the BBC.

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So where did it all go wrong?

The UK’s high street retailers have faced “tough times amid a squeeze on consumers’ income, the growth of online shopping and the rising costs of staff, rents and business rates”, the broadcaster says.

Mothercare UK has been one of the worst-hit, having already entered a company voluntary arrangement (CVA) last year, which allowed it to cut its UK store total from 134 to just 79 after a dramatic collapse in sales.

The Guardian reports that earlier this year the company “sold the Early Learning Centre toy brand in a desperate attempt to keep the UK business afloat”.

However, it has now confirmed that its remaining stores would “not return to profitability and that it had failed to find a buyer for the business”, adding that the shops will stay open until administrators have been appointed and wound down the business.

“Since May 2018, we have undertaken a root and branch review of the group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK Retail business,” the company said in a statement, reports the Daily Mirror.

The move does not include Mothercare’s profitable overseas operations, which have more than 1,000 stores in 40-plus countries. Mothercare said the UK administration filing was a “necessary step in the restructuring and refinancing of the group”.

Mothercare’s UK retail division is the only one that makes a loss and currently employs 500 full-time staff and around 2,000 workers on a part-time basis.

What has the reaction been?

Shares in the parent company dived by 29.2% to 8p in early trading on Monday, according to Metro.

Retail analyst Steve Dresser told the BBC that Mothercare had “failed to adapt to the world of online retail”, adding that the firm had “got very used to fat margins and a way of trading that’s store-based”.

“I think you would be hard-pressed to know what the brand stands for,” he said.

Richard Lim, chief executive of the Retail Economics consultancy, added: “This is perhaps one of the most highly anticipated collapses on the high street. The retailer was already on life support, having conducted a CVA last year. The cost-cutting operation and disposal of assets have not gone far enough to revive plummeting profits.”