Mothercare seeks new lenders amid franchising plans

Mothercare has confirmed it remains “on track” to become a “profitable” international franchise operation, with plans to operate in around 40 international territories. 

In its latest update, the retailer confirmed that discussions are ongoing with existing franchise partners in efforts to “establish a more sustainable and less capital-intensive business” going forward.

It is also holding discussions with Boots to finalise the contractual arrangements for its appointment as its UK franchise partner, as was first announced last December. 

Meanwhile, the group is speaking with a number of prospective new lenders in regards to securing new facilities. As of 19 June, the group’s total secured debt remains at £18m, which it expects to be further reduced through administrators. 

As part of its ongoing restructuring, Mothercare has also agreed to a short-term sublease of a “substantial” part of its main Daventry warehouse. 

It anticipates that this will reduce cash occupancy costs for the Group in respect of those premises by approximately £220,000 per month.

The group’s head office is also moving to a “smaller and more cost-effective” site  in August 2020, with plans to surrender its existing lease on its current head office in mid-July. The move will reportedly save £900,000 per year. 

Clive Whiley, chairman of Mothercare, said: “We are finalising our arrangements with both our existing franchise partners and Boots as our new UK franchise partner and will make further announcements in due course. Our discussions with various other financing partners also continue constructively. 

“We have carefully managed our business over the past three months, to mitigate the impact of the COVID-19 pandemic on our cash flows and liquidity during this period of global crisis which is reflected in our unchanged bank debt position since March.” 

He added: “Whilst we have not been immune to temporary store closures in almost all of our territories over the period, I am pleased that we are seeing the reopening of our partners’ stores.

“At the same time, we continue to take action to reduce our cost base and address legacy issues, helping with our return to being a profitable and sustainable business.”