Mothercare is to close about 50 of its 137 stores by June next year with the potential loss of about 800 jobs after landlords approved a financial rescue package on Friday.
Clive Whiley, the interim executive chairman of the struggling baby goods retailer, said the deal was a “crucial step forward to achieve the renewed and stable financial structure for the business that will drive an acceleration of Mothercare’s transformation”.
The closures are another blow for troubled high streets around the country, which are facing an almost unprecedented retreat by household names struggling to adapt to changing consumer habits and the economic slowdown.
A squeeze on shoppers’ budgets, resulting from inflation on basic necessities including food and travel at a time of low wage growth, has combined with a switch to buying online and purchasing experiences rather than physical items, to make life tough for traditional shopkeepers.
Marks & Spencer has said it plans to close at least 100 stores by 2022, Toys R Us UK is closing all its 80-plus shops after going bust in February, while the fashion chain New Look and the flooring specialist Carpetright are shutting dozens of stores as they battle for survival.
However, Mothercare shoppers in Wandsworth told the Guardian that the chain had also lost its edge amid new competition from the supermarkets and rivals such as Next as well as the ability to trade secondhand clothes online via sites such as Facebook or eBay.
“It’s old-fashioned, fuddy-duddy and a bit like a supermarket presentation, just no wow factor. They’ve just held on to their reputation so long but haven’t moved with the times,” Siobhan Kane, a full-time mum, said.
Laura Wingate, with her five-month-old son, said she was not impressed by customer service while the stores could be tricky to negotiate with a pram.
“Mothercare is good quality, it’s a staple, but in comparison with other places its not on the ball,” she said.
On Friday, more than three-quarters of Mothercare’s independent creditors – including landlords and suppliers – backed the retailer’s company voluntary arrangement (CVA) plan, a form of insolvency that enables retailers to exit unprofitable stores and reduce rents.
Under the deal Mothercare asked for 65% rent reductions on 49 stores that are expected to close by next June and said it would halve rent paid on a further 21 outlets.
The next stage of the group’s survival plan involves Mothercare raising £28m from shareholders, a condition of it securing £67.5m in debt facilities to support the ongoing running of the business.
Whiley said: “We are very grateful for the support of our many stakeholders across our creditor base in supporting today’s CVA proposals. Their forbearance and support today is a crucial step forward to achieve the renewed and stable financial structure for the business that will drive an acceleration of Mothercare’s transformation.
“These measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally.”
Securing the agreement on rent cuts and store closures comes despite fears of a push back from landlords, who have been faced with a string of CVAs in recent months.
New Look, Carpetright and the restaurant chains Carluccio’s, Byron, Prezzo and Jamie’s Italian have used the process to jettison unwanted outlets.
House of Fraser is expected to imminently announce details of a restructure under which at least 20 stores will close – a third of the group.
The process is facing a potential delay amid wrangles with lenders and landlords over terms. There are fears the process could collapse as House of Fraser struggles to agree a deal at least two weeks before its next quarterly rental bill on 24 June.
Charlotte Coates, a restructuring specialist at property advisory firm JLL, which is working with consultancy Begbies Traynor to advise a group of House of Fraser landlords, said they wanted more transparency on the terms of the deal.
Landlords’ concerns come as they face further potential CVAs in coming months.
Hilco, the new owner of Homebase, is understood to be planning to close about 60 of the DIY chain’s stores under a restructuring plan expected to be implemented over the summer. PoundWorld’s private equity owner, TPG, is also weighing up a CVA if it is unable to find a buyer for the cut-price chain.
List of proposed Mothercare store closures
The list below comes from information in a leaked document seen by the Guardian.
Aldershot, Hampshire
Bangor, Northern Ireland
Bedford
Bexleyheath, Kent
Blackburn, Lancashire
Bradford, Yorkshire
Brighton
Brixton, south London
Bromley, Kent
Clacton-on-Sea, Essex
Coatbridge, Scotland
Colliers Wood, south London
Croydon
Crystal Peaks, Sheffield
Denton, Greater Manchester
Doncaster
Eltham, south London
Exeter, Devon
Fort Kinnaird, Scotland
Grafton Centre, Cambridge
Guildford, Surrey
Harrogate, North Yorkshire
Holloway Road, north London
Hounslow, Middlesex
Inverness, Scotland
King’s Lynn, Norfolk
Kirkcaldy, Scotland
Llandudno, Wales
Londonderry, Northern Ireland
Macclesfield, Cheshire
Maidstone, Kent
Newbury, Berkshire
Newport, Isle of Wight
Newport, Wales
North Shields, Newcastle
Plymouth, Devon
Portsmouth
Reading
Rotherham, South Yorkshire
Salisbury, Wiltshire
Stafford
Stockport, Greater Manchester
Sutton, Surrey
Walsall, West Midlands
Wandsworth, south London
Weston-super-Mare
Worthing, West Sussex
Yeovil, Somerset
