Former Mothercare CEO Mark Newton-Jones is set to return to the retailer, as it announced the closure of 50 stores as part of a company voluntary arrangement (CVA).
The struggling mother-and-baby retailer this morning unveiled a turnaround plan, including the proposed CVA.
KPMG has been appointed to oversee the CVA process, under which 50 stores will close, reducing the UK portfolio by more than a third, decreasing from 137 to 78 by 2020. In addition, Mothercare will seek rent reductions on 21 stores.
A further £5m of cost savings will also be made.
The company will also undergo refinancing to raise up to £113.5m by seeking new shareholder investment and borrowing. Mothercare has also secured backing from pension stakeholders for revised funding arrangements.
It is not yet known how many of Mothercare’s 3,000 employees will be affected by the proposals, but the retailer said it is engaging with staff representatives.
The CVA is expected to be implemented by July 2018.
As part of the announcement, it was also revealed that Mark Newton-Jones will return as CEO. Newton-Jones was replaced by Kmart Holding group president David Wood, when he stepped down in April. Wood will now shift to the role of group managing director.
Since Newton-Jones’ departure, Mothercare chairman Alan Parker has retired.
Clive Whiley, interim executive chairman, said Newton-Jones’ return “provides us with a first-class executive team to ensure implementation of the transformational tasks ahead of us”.
He added: “The recent financial performance of the business, impacted in particular by a large number of legacy loss making stores within the UK estate, has resulted in an unsustainable situation for the Mothercare brand, meaning the group was in clear need of an appropriate resolution.
“These comprehensive measures provide a renewed and stable financial structure for the business and will drive a step change in Mothercare’s transformation.”
Last month Mothercare announced a further drop in sales, as worldwide sales fell 4.8% for the full year to 24 March 2018.
Like-for-like sales in the UK dropped 1.3% for the year, and total UK sales fell by 4.8%. International sales also fell by 5.8% on a constant-currency basis.