More town retail jobs at risk as Mothercare's UK arm lines up administrators
PUBLISHED: 10:37 04 November 2019 | UPDATED: 10:37 04 November 2019
Around 16 staff at Ipswich's Mothercare store are facing an anxious time after the retail chain announced that it would be appointing administrators.
They are among 2,500 employees - 500 full-time and 2,000 part-time - whose jobs are now at risk across its 79 UK stores.
The baby items retailer had hoped to bounce back after drastic cuts last year saw its stores reduced from 137 to 79 aimed at keeping it afloat, but it joins a host of chains - including Bonmarche, Jack Wills and Karen Millen - that have gone bust in recent months.
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In the financial year to March, Mothercare UK slumped to a £36.9m loss. It is now set to file its notice of intent to appoint administrators for its UK business on Monday, November 4.
The global group said a review of the UK business revealed it was "not capable of returning to a level of structural profitability".
"It's just been a tough one," a spokesman said.
As the business was unable to satisfy the cash needs of its UK arm, it would file a notice as part of the restructuring and refinancing process.
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But Mothercare said the worldwide listed group remains profitable despite the problems facing its UK division.
In July, the company said that it was making progress through its Company Voluntary Arrangement (CVA) restructuring plan but saw UK profit margin improve more slowly than forecast due to difficult retail conditions.
UK sales fell by 23.2% for the 15 weeks to July. Meantime, the UK business offloaded its Early Learning Centre business to rival toy business The Entertainer for £13.5m.
In a statement, the company said: "The company operates a successful global brand business generating over £500m of revenues each year from over 1,000 stores internationally in over 40 territories in which the Mothercare brand operates. In the financial year ended March 2019, the brand generated profits of £28.3m internationally whereas the UK retail operations lost £36.3m."
It added: "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. Through this process, it has become clear that the UK retail operations of the group, which today includes 79 stores, are not capable of returning to a level of structural profitability."
Richard Lim, chief executive officer at Retail Economics, said: "Years of under-investment in the online business and its inability to differentiate itself as a specialist for young families and expectant parents has been the root of its seemingly inevitable downfall.
"As competition has become fiercer they have been beaten on price, convenience and the overall customer experience.
"Put simply, they have been left behind in today's rapidly evolving market and the board has been unable to restructure the business fast enough to cope with a new retail paradigm that has emerged."