Mothercare making ‘significant progress’ with transformation, but feels Covid-19 impact

Mothercare has announced that it has made “significant progress” with its ongoing transformation strategy but has been directly impacted by Covid-19.

At the end of last year, the maternity and babywear specialist announced plans to transform the business and generate revenues through an asset-light model, operating in over 40 international territories.

The company said in a trading update on Monday: “We continue to make significant progress with those plans and have substantially completed our transition to refocus the group on our core competencies of brand management and the design, development and sourcing of product to grow the Mothercare business with our global franchise partners.”

However, the business said it has seen “direct consequences” from Covid-19, with particular disruption to its franchise partners and suppliers which will “lead to a material impact on Mothercare’s short-term revenues.”

The company said that while many of its key head office staff can work efficiently from home, a number of its retail workers cannot, which has resulted in “incremental” operating costs for the group.

Mothercare said it will seek to utilise tax reliefs and other forms of financial aid announced by the government when they are made available.

In December, Mothercare entered into an agreement for Boots to become its exclusive franchisee. The company said that although it remains “on track” with finalising the details of the arrangement, there have been delays caused by Covid-19, and it now expects the contractual arrangements to finalised in late spring, with a wider Mothercare product offer to be available online and in Boots stores from late summer 2020.

The company added that it has achieved a substantial reduction in bank debt and remains in discussions with a number of debt providers regarding entering into new debt facilities.

Mothercare chairman Clive Whiley said in a statement: “In the current circumstances, we have activated our contingency plans to deal with the challenges that we and others are facing in the current global crisis, focusing on the well-being of our colleagues alongside our ongoing business and corporate liquidity. We continue to enjoy the support of our key stakeholders and financing partners and we are very grateful to them at this unprecedented time.

“We believe that the intrinsic value of our brand, the close contact fostered with our key stakeholders over the last two years and our seamless, deep understanding of the Group's new trading cash flow dynamics, honed over the last six months, will prove to be extremely valuable.

“At this time we believe that our efforts should be focused on helping to preserve the businesses of our franchise and manufacturing partners through even more collaborative ways of working, to ensure both the short term liquidity of our business together with our return to longer-term profitability. We are already seeing the benefits of this approach being brought to bear.”

Photo credit: Mothercare UK, Facebook