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Mothercare to franchise UK stores as sales fall

Mothercare

Mothercare is set to franchise UK retail store operations, as it reports a 9.2% drop in total group sales for the 15 weeks to 13 July 2019.

The retailer reported that UK like-for-like sales fell by 3.2% and international sales fell by 4.5% year on year on a constant-currency basis, but did not disclose specific figures. It filed for a company voluntary arrangement in April in a bid to reverse tumbling profits and sales

Mothercare CEO Mark Newton-Jones said the business was seeking to shift UK retail operations to an independent franchise model as part of ongoing plans to revamp its structure, but did not provide any detail on a proposed timeline for the change.

Total UK sales fell by 23.2% as a result of Mothercare’s store closure programme, which cut the UK portfolio from 134 to 79. Online sales were also impacted by store closures – down 12.1% – as the retailer lost out on sales that were previously made via in-store devices.

The retailer noted that it had made significant progress towards optimising its UK retail operations, but said that, given the challenging outlook on the high street and the need to discount, improvements to gross margin would take longer to implement than originally planned.

Newton-Jones commented: “The UK retail market remains challenging and though the rate of decline in like-for-like sales has moderated, margin investment in promotional activity has been necessary to stimulate sales, both in our stores and online.

“The impact of this has negated much of the margin benefits we had expected to materialise. Furthermore, we have observed a lower than expected transfer of sales following the CVA store closure programme which completed in early April 2019.”

“The process of restructuring and rebuilding a sustainable business continues, and we have in place financing plans to support these actions as we aim to be bank-debt free by the end of the year. Our immediate priority is to complete the transformation of the business with a near-term focus on evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise.”

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Readers' comments (1)

  • Usually fashion businesses look to franchising as a way of expanding - particularly overseas. As such, Mothercare's move is innovative. But what will landlords make of it?

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