Closures and job cuts as Mothercare uses tough love to restore fortunes

The mother and baby products retailer – which has been struggling against online and supermarket competition – will shut a further 111 UK outlets between now and March 2015. The result, the company said, will be a “profitable core” of 105 high street and 95 out-of-town stores.

The biggest cuts will be across the Early Learning Centre (ELC) chain of toy shops, which Mothercare bought for £85 million in 2007. ELC, which was owned by John Menzies in the late 1980s, will see the number of outlets slashed from 102 to 27, while the number of Mothercare stores will fall from 209 to 173.

The cuts come on top of 62 closures during the year to the end of March under a previously-announced restructuring programme. Mothercare yesterday declined to identify specific locations due to be closed, saying only that it would depend upon the expiration of leases and “other factors”.

However, the company expects the overhaul to improve UK profits by some £13m by 2015. This will come at the cost of an estimated 730 redundancies.

The group, which issued three profit warnings last year and parted with its chief executive, said like-for-like sales at its UK stores fell 8.2 per cent during the final quarter to 31 March. That compared with a decline of 5.4 per cent in the third quarter. By contrast, international sales were 18 per cent higher in the fourth quarter. Mothercare said yesterday that it would accelerate its overseas expansion in both existing and new territories.

Full results of the structural review currently being led by executive chairman Alan Parker will be presented alongside Mothercare’s year-end results on 24 May, by which time new chief executive Simon Calver will have joined the group. Calver was formerly head of the international unit of Lovefilm, which is now owned by Amazon.

With the cornerstones of Mothercare’s transformation programme in place, Parker said he was confident the group could now deliver “sustained recovery and long-term success”.

“Simon Calver joins us later this month and brings with him invaluable business change skills plus e-commerce and international brand expertise,” Parker added. “Simon will take whatever action is necessary to deliver the strategy and, as such, will present his detailed plans in May.”

In addition to store closures, the group will also trim costs at its head office with the loss of as many as 98 jobs there. This is expected to lead to savings of about £20m.

The total cost of closures and head office restructuring is expected to reach £35m. Mothercare has suspended its dividend payment to help pay for this, and has also renegotiated banking facilities with Barclays and HSBC.

Shares in Mothercare, which have lost 60 per cent of their value during the past year, closed 7.8 per cent, or 13.25p, higher yesterday at 183p.

Seymour Pierce analyst Freddie George said: “We are also retaining our sell recommendation and our price target of 145p until we have more detail on the strategic review.”