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Published
Jun 22, 2020
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Mothercare acting CEO to quit, company to save millions on properties

Published
Jun 22, 2020

Mothercare updated on its transformation plan on Monday and also shared details about its efforts to ensure financial stability in the middle of the coronavirus crisis.


Mothercare is transforming itself from a retailer to a brand owner



It has struck deals on its HQ and warehouse facility that will help it make big savings on both a monthly and annual basis. But it said its interim CEO Glyn Hughes is stepping down at the end of this month as he doesn’t want the job on a permanent basis.

The firm has been seeking a new permanent CEO yet Hughes ruled himself out of this process and “has expressed his desire to step down to pursue other opportunities”.

The company is continuing its executive search for a permanent replacement and said its COO and CFO will be in charge for now, “with close oversight from the Chairman”.

The business, which recently closed all of its stores and turned itself into a brand owner rather than a retailer, said it remains on track to become a “profitable international franchise operation, generating revenues through an asset-light model, operating in around 40 international territories”.  

It continues “to make significant progress” with its plans and has “substantially completed” its transition. And while the impact of Covid-19 has had “direct consequences” for the group and its various stakeholders, the “experience we gained at the time of the administration of Mothercare UK last November, is proving invaluable in helping us — with the support of our franchise and our manufacturing partners — to manage and mitigate the overall impact on both our and their businesses”.

It said around two thirds of its partners' global retail locations are now open and “constructive discussions” are ongoing with its existing franchise partners “to establish a more sustainable and less capital-intensive business going forward with effect from the A/W20 season”. It’s also still talking to UK health and beauty chain Boots to finalise the details for its deal to become the UK franchisee.

The company has been through a bruising time in recent years that culminated in the closure of all its directly operated stores in Britain and clearly, financial stability is a key focus. On Monday, it also said that in line with its plans to recapitalise the business “with the minimum possible further dilution for shareholders", it’s in talks with a number of prospective new debt providers regarding entering into new facilities. 

And it "continues to make significant progress in addressing its legacy infrastructure and associated cost base". Like other companies in the retail sector both in the UK and Europe, it has taken steps to cut costs on some of the property it occupies.

For many, the sale and lease-back of expensive head office buildings is the way forward. Mothercare isn't quite taking that approach but it has entered into an agreement to move to a smaller and more cost-effective head office in early August. Terms have also been agreed for a surrender of the existing lease of the company's current head office in Watford in mid-July and this move should cut cash occupancy costs for its HQ by around £900,000 a year.

It’s also agreed to a sub-lease, on a short-term basis with a minimum term of four months, of a substantial part of its main Daventry warehouse to a third party. The site previously catered to the UK retail business of Mothercare for the most part, so makes practical as well as financial sense. This move will cut cash occupancy costs by as much as £220,000 a month.

Chairman Clive Whiley said of all this: “We have carefully managed our business over the past three months, to mitigate the impact of the Covid-19 pandemic on our cash flows and liquidity during this period of global crisis. Whilst we have not been immune to temporary store closures in almost all of our territories over the period, I am pleased that we are seeing the reopening of our partners' stores. At the same time, we continue to take action to reduce our cost base and address legacy issues, helping with our return to being a profitable and sustainable business.”

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