Mothercare share rise as investors give thumbs-up to UK store closures
Investors seem to approve of Mothercare throwing in the towel with its UK retail operation, despite the large loss of jobs that it will involve, suggesting that they believe the company can thrive without those stores.
The firm’s shares jumped on Wednesday and continued to rise on Thursday with its stakeholders clearly thinking it has a stronger chance of surviving and prospering with the UK retail chain not acting as a millstone around its neck.
The mother and baby products retailer operates as a brand owner (with its stores franchised) in international markets, and that part of the business has remained profitable. But the losses at its directly-operated UK store chain have outweighed its international profits, even after the firm’s company voluntary arrangement and its exit from more than 50 of its physical shops.
On Tuesday, the company appointed PwC as its UK ops administrator and said it will close all of its remaining 79 UK stores.
The company also unveiled other restructuring plans that include a share placement, changes to its pension payment schedule and repaying debt.
Not that the UK chain’s failure necessarily means the Mothercare name will disappear from Britain. The company continues to talk to potential partners who could operate stores in the country, on a franchise basis and unencumbered by onerous leases.
It means the listed company itself could have what chairman Clive Whiley suggests might be a "bright future ahead” as it sheds a major drain on its finances and focuses on profitable operations.
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