Mothercare plans to sell children’s and babies’ toy retailer Early Learning Centre (ELC) to Teal Brands, a subsidiary of the Entertainer Group, for up to £13.5m.
The group said it does not have the necessary “capital, resources or scale” in the toy market to continue to invest and develop the own‑brand ELC toys needed to maximise returns.
ELC products will continue to be sold within Mothercare UK stores and online overseas via a long term concession arrangement with the Entertainer Group as part of the disposal.
The mother-and-baby retailer said the sale will help it reach its aim of being bank debt-free by the end of 2019.
Mothercare said it was on track with its transformation plan. The UK store closures are ahead of schedule: the retailer will have 80 stores by the end of this month, down from 137 in May 2018, when it launched a company voluntary arrangement.
Mothercare said it had created a “leaner organisational structure”, and is now on track to deliver cost savings of at least £19m per year – assisted by the sale and leaseback of the head office for £14.5m in December.
In its most recent results for the 13 week period to 5 January 2019, Mothercare’s like-for-like sales fell by 11.4%. Online sales were down 16.3%.
CEO Mark Newton-Jones said: “We have made significant progress in recent months as we continue our strategic transformation to deliver a sustainable and profitable future for Mothercare.
“This disposal of Early Learning Centre provides a further step towards eliminating our bank debt, and our new concession arrangements with The Entertainer will bring our customers an even stronger toys offer, both in stores and online. We look forward to working with the team at The Entertainer in the years to come.”