The struggling retailer Mothercare is to cut 900 jobs, 100 more than previously announced, as it put its Children’s World subsidiary into administration.
The move comes after landlords rejected the company’s proposals for rent reductions for Children’s World stores last month. Mothercare will now close 60 of its 137 stores, 10 more than it said in May. These will be carried out through a company voluntary arrangement (CVA), which allows firms to shut loss-making shops and secure rental discounts.
It expects to make annual savings of about £10m with the closures, and plans to raise £32.5m from existing shareholders through a rights issue.
Clive Whiley, the group’s interim executive chairman, said: “Whilst the lack of full approval for the Children’s World CVA was disappointing, we have now found a solution which allows us to go further and faster with the right-sizing of our store portfolio. We have also identified significant areas for further efficiencies and cost savings, which will underpin our return to a sustainable future.
“Notwithstanding the unavoidable impact the measures will have upon some of the group’s employees, we have to act with urgency to mitigate the headwinds being experienced by the UK retail sector as a whole.”
Mothercare has been hit by the problems facing traditional high street retailers, including a squeeze on consumer spending and the threat of online competition. But shoppers have also said the business is old fashioned and “fuddy-duddy”.
Mothercare’s chief executive, Mark Newton-Jones, said the refinancing would help revitalise the business.
“We have seen an unprecedented period for UK retail and we have not been alone in facing a number of strong headwinds,” he said.
“I’m pleased to say however, that we are now in a position to refocus on our customers and improve the Mothercare brand both in the UK and across the globe.
“We have exciting plans ahead to revitalise the brand through enhancing our product ranges, improving our design and value, developing our digital and multichannel proposition and investing in our people.”
Following news of the cash call, Mothercare shares slumped 9% to just 26p.
