Mothercare has confirmed it is considering franchising its UK retail operations.
In a trading update this morning, chief executive Mark Newton-Jones said the firm had a “near-term focus on evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise”.
The maternity and baby goods chain has struggled in the turbulent retail market, embarking on a store closure programme which has seen its estate reduce from 134 stores totalling 1.3m sq ft last year to 79 stores totalling 900,000 sq ft.
Mothercare said its store closure programme had caused a 29.9% fall in its total UK sales for the 15-week period ended 13 July 2019.
The firm added that the closure of the physical stores has also affected online sales, owing to the loss of iPad sales in closed stores, leading to an overall reduction in online sales of 12.1%.
Mothercare’s international franchise business, which comprises 2.7m sq ft across 1,014 shops, saw a 2.1% decline in actual currency.
Growth in India, Indonesia and Russia was offset by retail sales declines in the Middle East of 11.1% in constant currency.
Newton-Jones added: “We have continued to make good strategic progress in the first quarter in our transformation to deliver a sustainable and profitable future for the Mothercare brand.
“The UK retail market remains challenging and though the rate of decline in LFL 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.”
To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette
