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Mothercare seeks £100m turnaround funding 23 September 2014

Embattled maternity retailer Mothercare has announced it is to launch a rights issue to raise £100m to fund its ongoing turnaround plan.

The company will ask shareholders to raise capital to fund its move to a digital-led strategy and pay off a “significant amount” of its debt burden.

Alan Parker CBE, chairman of Mothercare, said: “This fund-raising is a pivotal step for Mothercare. It will position us for the next phase of our strategy, which is focused on returning the UK to profitability, reinforcing the strong growth potential in our International operations, and as a result, generate sustainable long-term value for Mothercare shareholders”.

As part of the turnaround strategy, Mothercare will continue to close lose-making stores, shutting approximately 50-75 locations by the end of the next financial year.

Stand-alone Early Learning Centres are set to be closed, however the company plans to trade through the brand in concession stands and online.

The closures are estimated to cost approximately £25m, while the company has also earmarked £20m to fund its store refurbishment programme. £40m of net proceeds will be used for “the full repayment of the group’s existing term loan”.

In January the company’s turnaround strategy appeared to have stalled, when Mothercare issued a profit warning as sales and shares slumped. {LINK}

Mark Newton-Jones, CEO of Mothercare, said: “We have set out our strategic plans for the turnaround of Mothercare and ELC in the UK. By modernising and transforming the UK into a digitally-led business supported by a modern store estate we will underpin the growth of the group’s successful International business.

“Our ambition is for Mothercare to become the leading global retailer for parents and young children. The support of our shareholders will allow us to deliver on this ambition. I am excited about the prospects for this company and the opportunity we have to provide great products, service and advice to our customers worldwide.”

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