Mothercare to close 110 more high street stores

Mothercare's accelerated store-closure strategy will leave it free to concentrate on its more profitable out-of-town branches and its international business, which now accounts for about a quarter of sales.

But the group said it does not expect to shed more than about 250 jobs out of a current UK workforce of some 7,300, as staff would be re-deployed.

The leases on 120 of the company's high street shops are due to expire over the next two years, allowing the firm to close 110 stores and renegotiate lower rents on a further 40 shops.

Over the past three years, Mothercare has already reduced its high street estate by about a quarter to 373 shops, including the closure of 50 Early Learning Centre (ELC) outlets.

But the group has also opened 109 ELC concessions within larger Mothercare stores, particularly its own-of-town branches.

The cost of closing the latest high street stores is expected to be limited to about 5 million due to leases ending, with rental costs reduced by 12m a year by March 2013, adding up to 4m each year to pre-tax profits. Mothercare said it would also expand its wholesale business, which is already benefiting from a partnership with Boots.

News of the closures came as Mothercare reported a 7.1 per cent rise in global sales across its 55 countries to 1.2 billion.

Pre-tax profits were down 23.4 per cent to 28.5m, in line with City forecasts after profit warnings in January and March.

Analysts were divided over the store-closure strategy. Jonathan Jackson, head of equities at Killik & Co, said: "With a high yield, likely to be close to 5 per cent after expected upgrades, and the worst of the competitive pressure behind it, Mothercare remains an attractive story."

But Nick Bubb, analyst at Arden, said: "All this sort of thing hasn't stopped profits falling over the past three years and we suspect the real answers lie elsewhere. Given increasing supermarket competition, we think Mothercare needs to look more closely at the pricing of its range, the positioning of its range and the design of its stores."

Mothercare was launched as a mail order business in 1962 and took over ELC in June 2007. ELC had been owned by Edinburgh-based John Menzies during the 1980s and 1990s before a management buy-out.

The latest closures add to recent woes for UK high streets, with music retailer HMV announcing in January that it will axe 60 stores and electrical retailers Comet and Dixons unveiling plans to close ten and 150 stores respectively.

On Tuesday, retail guru Mary Portas launched a campaign to rejuvenate local shopping.