Franchised Mothercare stores across the Middle East and North Africa (Mena) will not be affected by the roots-and-branch restructuring of the UK parent company announced on Thursday.
“The announcement from Mothercare in the UK has no impact on stores in the Middle East,” said a spokesperson for Kuwait-based Alshaya Group, which operates the Mothercare franchise in the region.
The baby products retailer in the UK said it will close 50 stores as part of a rescue plan following years of losses – a move that puts 800 jobs at risk. Its earnings plummeted to a pre-tax loss of £72.8 million pounds (Dh361m) in 2017, from £7.1m profit the previous year. The UK business has not turned a profit since 2012.
Mothercare also announced the re-appointment of Mark Newton-Jones as chief executive after he left in April following poor Christmas trading and a profit warning. Under the planned restructuring – through a UK-administered ‘company voluntary arrangement’ (CVA), which prevents the firm from going into administration – ailing Mothercare will cut rents at 21 stores, in addition to the planned closures.
It has also arranged a refinancing package worth up to £113.5m, including £28m raised through issuing new equity shares, and extending existing debt facilities. There will be a further £8m in new shareholder loans, Reuters reported. The CVA is subject to a majority vote from Mothercare’s creditors.
“Recent financial performance, impacted in particular by a large number of legacy loss-making stores within the UK estate, has resulted in a perilous financial condition for the group,” Mothercare said in a statement on Thursday.
The retailer has nearly halved its UK store numbers over the past five years and although it had intended to have 92 stores by 2023, the latest closures will shrink that figure to 73.
Mothercare was Alshaya Group’s first retail franchise, launching in 1983. Today, the conglomerate operates more than 220 Mothercare stores across the Mena region. That number has remained constant over the past 12 months despite ongoing reviews of individual store performance as standard practice.
Alshaya will continue its relationship with the parent company despite the UK restructuring, including continuing to procure stock from Mothercare, negotiate supplier costs and operate the brand’s e-commerce websites.
In 2016, another Alshaya-franchised UK brand, BHS, entered into a CVA agreement with creditors, under which 40 of its 160 UK stores were shut. Alshaya said the restructuring would have no impact on BHS stores in the Middle East.