Mothercare says transformation plan is working but Covid-19 hits revenues
Mothercare provided an update on its transformation plan on Monday and said it continues to make significant progress. It has substantially completed its transition to refocus itself on brand management and the design, development and sourcing of product for its global franchise partners.
That said, the Covid-19 pandemic has been having "direct consequences" for the group, disrupting both its franchise partners and its suppliers’ businesses and operations.
In the UK, many of its head office staff are "working productively from home", but a number of its retail personal are unable to do so. UK government support is being used for around 430 of its Boots Mini-Club retail workers. You may remember that Boots has signed a deal to become the brand’s exclusive UK franchisee. But Mothercare also said on Monday that the pandemic is causing some delays to the final signing of contracts. They should be signed this spring with the full product offer available in the summer.
It also said the impact of the coronavirus on its franchise partners globally is likely to lead to a “material impact on Mothercare’s short-term revenues”. But it added that “the experience we gained as a result of the controlled supply shock that was exerted upon the business at the time of the administration of Mothercare UK and related store closures last November, is proving invaluable. We are in close dialogue with our franchise partners and our manufacturing partners, as we seek to manage and mitigate the overall impact on both our and their businesses”.
The company added that it has made progress in reducing its debt and is in talks with a number of debt providers regarding entering into new debt facilities.
Chairman Clive Whiley said: “In the current circumstances, we have activated our contingency plans to deal with the challenges that we and others are facing in the current global crisis, focusing on the well-being of our colleagues alongside our ongoing business and corporate liquidity. We continue to enjoy the support of our key stakeholders and financing partners and we are very grateful to them at this unprecedented time.
“At this time we believe that our efforts should be focused on helping to preserve the businesses of our franchise and manufacturing partners through even more collaborative ways of working, to ensure both the short term liquidity of our business together with our return to longer-term profitability. We are already seeing the benefits of this approach being brought to bear.”
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