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OVER 2,500 staff at Mothercare have been left in limbo as the retailer has appointed KPMG to assess its options.
The baby and maternity-wear seller is looking at contingency plans that could include further store closures or a restructure.
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The Mothercare Group has been trying to sell the UK business for some time now, to bring it in line with the rest of its operations internationally.
Globally, Mothercare stores operate on a franchise model and finding a new owner for the the UK business so it can work in the same way is still the company’s preferred outcome.
But KPMG have been brought in to look at all the other options available to the Mothercare Group, meaning that closing stores or corporate restructuring are both still on the cards.
Last, year Mothercare carried out its first Company Voluntary Arrangement (CVA). This resulted in a plan to close 55 shops – putting 900 jobs at risk.
A small proportion of the closing stores came from Mothercare’s Childrens World division, which went into administration.
These closures were completed by March this year, and the business has been shutting other outlets over the last 12 months too.
Now, there are just 79 stores remaining.
If Mothercare is successful in selling the business, there is a chance these stores could stay open and staff could keep their jobs.
What is a Company Voluntary Arrangement?
DIRECTORS can propose a Company Voluntary Arrangement (CVA) when a firm is experiencing difficulties in paying its debts
It means the company is essentially entering into a legally binding agreement with its creditors, which could include suppliers or landlords.
It enables a company and its creditors to come to a compromise agreement and avoid an administration or liquidation.
A CVA can provide a company with some breathing space to allow it to reorganise or restructure its funding and/or its operations with as little disruption as possible.
But if Mothercare goes down the restructuring route with a second CVA, its 2,500 UK employees could face unemployment.
Just a few months ago, Mothercare sold its Early Learning Centre business to the Entertainer for £13.5million.
Despite this, the retailer has continued to struggle in the UK.
In the year to March 2019, the retailer recorded a loss before tax of £87.3million.
Internationally, the retailer is much more successful and turned a profit of £28.3million in the same period.
A spokesperson for Mothercare said: “Our immediate priority is to complete the transformation of the business with a near-term focus on evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise.”
Mothercare, which was founded in 1961, employees thousands of staff in the UK.
The company’s headquarters are in Watford, Hertfordshire.
Back in April, Debenhams fell into administration with 50 stores to close after Mike Ashley’s rescue plan failed.
And in July, struggling shoe shop Office said it ‘could close branches as part of restructuring plans’.
Meanwhile, last week, the owner of hairdressing chain Supercuts went into administration putting 1,200 jobs at risk.
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