Bedtime for Mothercare: Mothercare closes down in the UK
November 28, 2019
2 min read
What's going on here?
Mothercare has entered administration, closing all UK stores, with its consequences potentially affecting Mamas & Papas. Mothercare previously issued profit warnings and had entered a Company Voluntary Arrangement in June 2018 to reduce rental payments for their store leases after suffering financial difficulties.
What does this mean?
The closing of all 79 of Mothercare’s UK stores is going to result in the loss of around 2,800 jobs. The only staff that will remain will be around 50 UK Head Office staff who will help to deal with Mothercare’s international business, which is quite profitable. Overseas, Mothercare has over 1,000 stores in 40 countries. Due to this successful international business, Mothercare expects its shares to stay on the London Stock Exchange.
The closure of Mothercare may be attributed to the rise of online shopping with cheaper alternatives sold online and in supermarkets. Due to this, Mothercare is considering potentially selling its brand in other retailers’ stores or online.
What's the big picture effect?
The first clear effect of this story is that Mothercare is another store in a long line of others which is closing down. The increase in business rates, high tax for properties and more consumers shopping online has led to more brick and mortar stores closing down and has threatened more stores to downsize.
A potential knockback effect of Mothercare entering administration was the closing of 6 Mamas & Papas stores and the cutting of almost 130 jobs. Mamas & Papas, like Mothercare, sell pushchairs, toys, baby clothes and maternity wear.
Mamas & Papas also entered administration, but was immediately bought back through a “pre-pack administration”. Essentially, the company was allowed to get rid of some of its debts and continue to trade from 26 stores and keep 600 jobs.
Ricardo Cincotta, the executive chairman of Mamas & Papas, reinforced the difficulty he is facing by stating that the store closures and entering administration were “necessary in a challenging market”.
Do you think the store closures will continue until retailers move primarily online? Or do you believe that the high street can be saved?
Report written by Harina Chandhok
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