Mothercare could be the next high-street chain to close stores in a CVA
PUBLISHED: 10:00 13 May 2018 | UPDATED: 16:21 13 May 2018
The new Mothercare chief executive is set to update the market on the troubled retailer’s store closure plans next week, with the group also tipped to report a sharp fall in profits.
David Wood, who was parachuted in to replace Mark Newton-Jones just weeks ago, will lay bare the challenge the chain faces at Mothercare’s annual results on Thursday.
A consensus of City analysts forecast the group will post a 95% fall in underlying pre-tax profits to just £1m in the year to March. The figure compares with a profit of £19.7m last year.
It will come alongside an update on Mothercare’s refinancing progress, with the group having mandated KPMG to help it secure additional cash from its lenders HSBC and Barclays.
Rothschild is also working with the group to secure outside funding.
Since taking the helm in April Mr Wood – who joined from US grocery and pharmaceuticals giant Kmart – has said his “immediate priority” is to ensure Mothercare returns to firmer financial ground.
To this end, he is expected to announce an acceleration of its store closure programme, with speculation rife that this will be carried out through a company voluntary arrangement (CVA) – a move which would allow it to close loss-making shops and secure rental discounts.
Despite its travails Clive Black, analyst at Shore Capital, struck an upbeat tone.
“Mothercare clearly faces a number of challenges at this time but retains an excellent and still relevant brand in our view,” he said.
“The new senior management team is now focused upon the previously announced refinancing initiatives whilst also seeing through the ongoing business transformation.”
Mothercare also recently announced the departure of its chairman Alan Parker, who “retired from his position” after six years.
He has been replaced by Clive Whiley as its interim executive chairman with immediate effect.
Retailers across the board have been battered by weak consumer confidence off the back of soaring Brexit-fuelled inflation.
They have also had to contend with surging wage costs and eye-watering business rate hikes.
Since January, Toys R Us and Maplin have filed for administration, while fashion retailers such as New Look and Select have embarked on radical store closure programmes.
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