Mothercare to abandon the UK?

The chain racked up £82m losses in its first half - and executive chairman Alan Parker has hinted it might cut its losses and go elsewhere.

by Emma Haslett
Last Updated: 06 Nov 2012
Days for Mothercare’s UK operation may be numbered, after the baby products retailer posted half-year results which showed it had made an £82m pre-tax loss in the six months to 8 October – which, compared with the £300,000 profit it made this time last year, doesn’t look good. Executive chairman Alan Parker (who took on the ‘executive’ part of his title last month, after long-standing CEO Ben Gordon was forced out of the role) warned that Mothercare’s brand badly needs rejuvenating. Which doesn’t bode well for its UK workforce.

Its half-yearly figures make for dire reading: Mothercare announced in May that it would be shutting down 110 of its stores over the next two years, for which it’s had to shell out £78.5m, while it was forced to write down much of the goodwill associated with its acquisition of Early Learning Centre. And while revenues increased from £397m to £413m, like-for-like sales fell by nearly 10%, largely driven by a drop in demand for big-ticket items.

In fact, it’s that drop in demand for trendy prams and the like that Parker blames for the company’s bad fortunes. ‘Partly it’s the fact that we live in tough economic times, and partly that the price of buggies have been pushed a bit high,’ he explained. That’s as may be – but analysts reckon Mothercare’s fall in popularity could also have something to do with a change in parenting habits. ‘In the past, Mothercare relied on being the definitive source of information for expectant mothers, a position it used to justify its higher prices,’ explained Matt Piner, from retail consultancy Conlumino. ‘However, with consumers now increasingly confident using the internet… to educate themselves, the once habitual visit to Mothercare is becoming a thing of the past.’ And with online retailers able to offer cheaper deals, the chain is becoming increasingly irrelevant.  
 
So Parker’s assertion that it needs a facelift is probably right on the money – although he hinted that as part of that, it might consider simply cuttings its losses in the UK and heading overseas. The brand has actually been surprisingly successful abroad, with 975 franchise stores – which Parker reckons can be expanded to 2,000. ‘That’s got to be our objective,’ he said.

So at least there’s a prospect of rescuing the company – albeit in vastly reduced form. And to be fair to Parker, he's the man who saved Costa parent company Whitbread - so Mothercare is in safe hands. Although with unemployment already at a record high, that’s exactly the sort of rescue the UK government could probably do without.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today