Back in March 2018, following the highly publicised collapse of Toys R Us and Maplin’s, there was intense speculation at the time that the child and parenting chain store Mothercare was the next high-profile casualty on the UK high street.

At the time, Mothercare strenuously denied claims that its’ closure was imminent and instead insisted it was generating cash and that performance remained ‘in line with expectations’. This was despite the chain suffering significant share price falls over the past few years, with its peak valuation dropping below £503 million. Following a further setback last year, having experienced disappointing Christmas sales which led to the company having to cut profit expectations for January, its boss Mark Newton-Jones stated that he believed the company had the support it needed to continue to become a global retailer. Mr Newton-Jones even released a statement to reassure shareholders, by stating:

“The support already being shown gives us confidence that, despite the challenges, there remains a clear way forward for Mothercare to realise its ambition to be the leading global retailer for parents and young children”.

However, despite this apparent rallying cry and false sense of security, just over 18 months later, it was announced last month that all Mothercare stores would cease trading in the UK, leading to a loss of 2,500 jobs and the closure of all its UK stores. It is yet another example of a retailer falling victim to the volatile trading conditions of the UK high street, and despite a proud history and strong brand recognition, Mothercare succumbed due to its failure to adapt to current market trends and consumer expectations.

So how did this once popular high street brand name, who first opened their stores in the UK in 1961, follow a worrying trend of retailers who have collapsed over the past few years? We look at some of the reasons which led to Mothercare’s demise and why it was no longer capable of returning to a level of structural profitability.

Failure to adapt to the modern market

One of the key reasons for retailers struggling in the modern market is a failure to adapt to the times and to emerging consumer habits and trends. In fact, analysts had pointed out that Mothercare had slipped behind its competitors and had been beaten on “price, convenience and the overall customer experience”. It doesn’t take a genius to realise that those factors play a crucial role in sustainability, and Mothercare seemed to miss the trick by sticking to its old principles and failing to give the customer something new. Analysts further emphasised that Mothercare had failed to move along with the times, as competition soared, and parents turned to supermarkets and online stores to purchase maternity and baby goods. This, of course, stems from several years of underinvestment, particularly in its online business and thus, meant that it was not able to differentiate itself as a specialist for young families and expectant parents. Mothercare was also losing several price-driven customers who would simply compare products with their local supermarket and more often than not find it cheaper. It is a strategy which has been adapted superbly by supermarkets, where they have focused on aggressive expansion strategies and product diversification, offering customers multiple options at cheaper prices. Crucially as well, all these options are available online.

Lack of online investment

With the store geared at expectant mothers or those with new-borns, it should be common sense to understand that there will be times where the target consumer will find it very difficult to physically attend the store. The most logical solution – invest in your online platform to make it easy and convenient for your target market to make their purchase and have it delivered to their home. Mothercare should have identified this as an opportunity and closed some of its least profitable stores and invested more into infrastructure to support an efficient delivery service. Companies such as Amazon have taken a large chunk of the profits in the market from stores such as Mothercare, and their failure to act upon this has been detrimental to the sustainability of the company, playing a significant part in its eventual demise. With the UK also seen as a nation with a growing population, it appears Mothercare has failed to take advantage of this.

The CVA debate goes on

At the start of the year, PCR’s article titled ‘Was 2018 the year of the CVA’ discussed the increase and popularity of retailers entering into a Company Voluntary Arrangement (CVA). Of course, along with Mothercare, several other retailers had experienced a restructuring in the form of a CVA such as Carpetright, House of Fraser, Debenham’s and New Look, with the intention of restructuring their leasehold obligations which would have included closing sites and obtaining rent reductions. However, not all of these were a success, as seen with the example of Toys R Us, House of Fraser and BHS, who initially took the option of a CVA before falling into administration a short time later. In summary, within a CVA, the tenant company can restructure its lease obligations on a mass scale, without the need to negotiate with each individual landlord. The added benefit is that a CVA can also reduce the other real estate overheads of a company and facilitate the closure of unprofitable stores, even if an individual landlord does not approve of the CVA itself. Whilst it is perfectly normal to anticipate some sort of objection from landlords regarding the usage of CVAs, the majority generally accept that it is a better option than an administration or a liquidation. It is important to realise that the CVA is intended to save the business, however it may not necessarily save the company itself.

In relation to the CVA taken by Mothercare, the recent collapse of the firm shows that CVAs cannot fix everything, especially if the fundamental issues faced by a business are not properly addressed. In fact, this is a prime example where a CVA proposal was not realistic, achievable nor sustainable, and within hindsight, the CVA option was more of a stay of execution as opposed to a realistic restructuring method.

Inevitable and highly anticipated collapse

Again, with the benefit of hindsight, it appears that the decision by Mothercare to double the number of UK stores in 2007 was a disastrous move which had backfired on the company, leading to several store closures. Until recently, the company stated that it was “the only large-scale true specialist left in the mum and baby sector”. Although there was an element of truth to this statement, the reality was that several supermarkets, clothing retailers and Amazon were in fact essentially ‘stealing’ Mothercare’s business, with the retailer no longer considered a major player in the market.
Mothercare was always destined to face an uphill battle in the extremely volatile retail market and was one of the most highly anticipated collapses on the UK high street. The retailer was already seen to be on its ‘last legs’ having conducted a CVA last year with the closure of several stores. It is evident that the cost-cutting operation and disposal of assets have not gone far enough to revive plummeting profits and its demise is a sign of the times unfortunately, as witnessed by several other retailers over recent times.

How can PCR help

If you are a business owner of a retailer or a small business and are not sure about the usage of a CVA, we have a team of restructuring specialists who have experience in both putting CVAs in place and challenging their validity. If you are at all worried about the future of your business and are contemplating a CVA, then do get in touch with us and we can advise you if this is the best course of action for you. If not, we may be able to advise you on other forms of business restructuring tools which are best suited to achieving a business turnaround. Additionally, if you are a creditor being offered a CVA, then we can also advise you on your possible alternatives.

For more information or for assistance in any insolvency procedures in general, please contact the PCR Head Office on 0208 841 5252 to arrange a FREE initial consultation with one of our Insolvency Practitioners. alternatively you can email us at This email address is being protected from spambots. You need JavaScript enabled to view it. or use our Priority Contact Form, where we will look to get back to you as soon as possible. We treat every enquiry in the strictest of confidence.

Ahmed Ali
Practice Development Executive 

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