Mothercare has confirmed its UK business is on the verge of collapse, placing 2,500 jobs at risk.
The company announced on Monday morning, hours after a story by Sky News, that it was filing a notice in court to appoint administrators to Mothercare UK and its support arm Mothercare Business Services (MBS).
Its profitable franchising business outside of the UK – which represents the vast majority of Mothercare’s interests – is not covered by the process.
Mothercare has 79 stores in the UK – a number that has been substantially reduced following several efforts to save the loss-making operation.
The most recent attempts included the closure of 50 stores through a rescue deal agreed with creditors last year and the sale of new shares to investors to raise cash.
The UK retail arm lost over £36m in its last financial year, which covered the period of the so-called Company Voluntary Arrangement (CVA).
That was aimed at reducing costs as the wider high street battled weak consumer confidence and growing bills from rents, minimum wage rules and business rates.
The crisis has claimed several big names, including Bonmarche only last month. Others – even Sir Philip Green’s Topshop empire, have been forced to seek CVAs.
Mothercare’s UK retail division employs 500 full-time staff and around 2,000 workers on a part-time basis.
Stores are expected to continue trading for now.
Mothercare’s statement said: “Since May 2018, we have undertaken a root and branch review of the group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK Retail business.
“Through this process, it has become clear that the UK Retail operations of the group, which today includes 79 stores, are not capable of returning to a level of structural profitability and returns that are sustainable for the group as it currently stands and/or attractive enough for a third party partner to operate on an arm’s length basis.
“Furthermore, the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK.
“These notices of intent to appoint administrators in respect of Mothercare UK and MBS are a necessary step in the restructuring and refinancing of the group.
“Plans are well advanced and being finalised for execution imminently.”