LONDON (REUTERS) - Struggling British mother and baby products retailer Mothercare will close over a third of its British stores as part of a survival plan that also sees the return of the chief executive who was sacked just five weeks ago.
The firm's sales and profit have been hammered by intense competition from supermarket groups and online retailers in its main British market as well as by rising costs, resulting in what it called on Thursday (May 17) "a perilous financial condition".
It reported a loss before tax of 72.8 million pounds (S$132 million) for the year to March 24, on group sales down 2 per cent to 654.5 million pounds.
Mothercare's shares had lost 83 per cent of their value over the last year but rose as much as 34 per cent on Thursday after the firm detailed a 113.5 million pounds refinancing, including a planned 28 million pounds equity fundraising, and said Mark Newton-Jones would return as CEO.
Newton-Jones was ousted as CEO on April 4 by then chairman Alan Parker. Parker himself abruptly retired on April 19.
Newton-Jones' replacement as CEO David Wood, a former Tesco executive, will become group managing director.
Mothercare said it would seek creditor approval for so-called company voluntary arrangement (CVA) proposals that would enable it to shut 50 stores and secure rent reductions on 21 others. As many as 800 jobs could be lost.
The firm currently trades from 137 British stores, having had nearly 400 a decade ago. The new plan would see it trade from 78 British stores by 2020.
The CVA route, which allows firms to avoid insolvency or administration, has already been taken this year by fellow British retail strugglers - fashion chain New Look, floor coverings group Carpetright and department store group House of Fraser.
Brutal trading conditions for store groups - with pressure on British disposable incomes compounding intense competition - are also partly responsible for the collapse of Toys R Us British, electricals group Maplin and drinks wholesaler Conviviality.
Shares in Mothercare were up 5.4 pence at 25.4 pence at 1420 GMT, valuing the business at 46 million pounds.
"The recent financial performance of the business, impacted in particular by a large number of legacy loss-making stores within the UK estate, has resulted in an unsustainable situation ... meaning the group was in clear need of an appropriate resolution," said interim executive chairman Clive Whiley.
Analysts at Peel Hunt said Mothercare's measures looked sufficient to get the UK business back to break even.
"The wider challenge is to complete the process of making Mothercare's proposition more compelling, which will require a sharper view on pricing," they said.
In addition to the proposed equity issue, Mothercare has secured revised committed debt facilities of 67.5 million pounds, 8 million pounds of new shareholder loans and a new facility of up to 10 million pounds from a trade partner.
Creditor meetings to vote on the CVA proposals are expected on June 1, with the process projected to complete in July. The equity issue is conditional on the CVA going through.
Mothercare also trades from 1,131 stores overseas. It said international markets remained challenging, but it saw some recovery in the Middle East towards the end of its 2017 to 2018 year.