Mothercare sacked CEO to rejoin firm in shock move, 50 stores to shut
In a shock strategy shift, under-pressure Mothercare is to rehire sacked chief executive Mark Newton-Jones only 36 days after he was fired as the company continued to struggle.
And in another twist, David Wood, who took over as CEO from Newton-Jones, won't be leaving the firm. Instead he will become Group Managing Director with Wood and Newton-Jones working together to rescue the firm.
And on Thursday morning, Mothercare said that it's planning to launch a company voluntary arrangement (CVA) to allow it “to return to a more stable footing, accelerate the transformation of the group and drive it towards a viable and sustainable future.” Having “consulted extensively with its stakeholders [gaining] their support for this plan represents a strong signal of commitment to the group through this process,” it added.
So, the plan is to raise £28 million in July via a share placing and to take advantage of revised committed debt facilities of £67.5 million, as well as £8 million of new shareholder loans from the company's largest shareholders.
All of that extra finance is, of course, dependent on “an accelerated reduction of the UK store estate to reduce losses and rent liabilities” through the CVA. And this is rumoured to mean 1,000 job cuts out of a 3,000 total. The CVA will see a reduction in the store estate as 50 locations are closed while the company will negotiate lower rents on another 21 stores. It will be left with a portfolio or 78 stores by Financial year 2020 and 73 by financial year 2022, down from the current 137. While that maths doesn't exactly come out as 137 minus 50, the company offered no further explanation.
The company did say that its recent financial performance, “impacted in particular by a large number of legacy lossmaking stores within the UK estate, has resulted in a perilous financial condition for the group.” It didn’t comment on its international operations.
But if all its plans go through, it expects a “stabilised and renewed financial footing” plus the acceleration of its transformation and growth plan.
It's interesting, given the twist around the return of Mark Newton-Jones, that the person commenting on these plans in the statement wasn't David Wood. Instead it was interim Executive Chairman Clive Whiley.
He said: “Since my appointment, my priority has been to galvanise support from all of our stakeholders and provide a solution to the short-term problems facing the company. These comprehensive measures provide a renewed and stable financial structure for the business and will drive a step change in Mothercare's transformation.
“The potential for the Mothercare brand remains significant. However, there remains much to do and we must maintain a disciplined focus on cost control and cash generation throughout the business. But these measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally."
Whiley joined after previous Chairman Alan Parker had ousted Newton-Jones in early April, giving him just a few minute’s notice before the news of his exit was released. But he himself left the business soon after.
We haven't had an explanation of the thinking behind the CEO change, nor have we yet had the final results that were also expected to be released Thursday, but we’ll keep you updated as it happens.
Mothercare has seen a rapid decline in its fortunes in recent periods and has become one of the most high-profile UK retailers to face an existential threat as it battles changing shopper habits and a weak retail environment.
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