Baby goods retailer Mothercare has said it plans to call in administrators to the troubled firm’s UK business, putting 2,500 jobs at risk.
Mothercare said its 79 UK stores were “not capable” of achieving a sufficient level of profitability and that so far it had failed to find a buyer.
It said its stores would continue to trade as normal for the time being.
Analysts said Mothercare had been slow to adapt to competition from rivals and the switch to online retailing.
Mothercare has already gone through a rescue deal, known as a company voluntary arrangement (CVA). This is an insolvency process that allows a business to reach an agreement with its creditors to pay off all or part of its debts. The process enabled the chain to shut 55 shops.
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The firm said the decision to appoint administrators was “a necessary step in the restructuring and refinancing” of the group.
“Plans are well advanced and being finalised for execution imminently. A further announcement will be made in due course,” it said.
Aisa Kara’s parenting journey started in Mothercare when she used its Babybond ultrasound scanning service.
“I was so anxious waiting for my 12-week scan, and I don’t think either of us could believe it was actually happening, so we booked our private appointment,” she said.
“Everything was OK and we viewed a heartbeat, so we left elated, and as it was in Mothercare we got to buy our first item of baby clothing at the same time.
“We bought all our nursery items and pushchair from there, and my daughter and son have been dressed in Mothercare almost exclusively.
“The baby clothing is beautiful and I love the vintage styles. My only complaint is that the online experience isn’t as good as you would have expected from a company trying to keep up with the market.”
Dave Gill, national officer at the shopworkers’ union Usdaw, said: “Usdaw is providing our members in Mothercare with the support, representation and advice they need at this difficult and uncertain time.
“We will urge the administrators to treat the staff with dignity and respect, keep them fully informed through the administration process, do everything possible to save jobs and keep as many stores open as possible and prioritise stabilising the business to provide a more certain future.”
It is understood Mothercare is in advanced talks to move its pension schemes from its British operations over to its international parent company which remains profitable.
As first reported by Sky, the aim is to stop the schemes being placed in the Pension Protection Fund, which would likely result in cuts for members.
The company operates in more than 40 overseas territories, which are not subject to administration.
In the financial year to March 2019, Mothercare’s international business generated profits of £28.3m, whereas the UK retail operations lost £36.3m.
In its heyday, Mothercare had hundreds of stores. It was the go-to place for new parents. But it failed to keep up with our changing shopping habits. Mothercare’s UK arm has been loss-making for years. One big reason is there’s so much more competition these days.
From Zara and H&M to the major supermarkets, there are no shortages of places to buy children’s clothing and often at cheaper prices. And then there’s online, with the likes of Amazon who are able to deliver basic kit to your doorstep within hours of ordering. It has all eaten into Mothercare’s market share.
Truth is, this is a business that’s been losing money for a very long time. Last year’s CVA wasn’t enough to turn things around. Mothercare ran out of time and money to try to revive its fortunes.
Mothercare’s move comes as High Street retailers continue to face tough times amid a squeeze on consumers’ income, the growth of online shopping and the rising costs of staff, rents and business rates.
Retail analyst Steve Dresser told the BBC that like collapsed travel firm Thomas Cook, Mothercare had failed to adapt to the world of online retail.
“They got very used to fat margins and a way of trading that’s store-based,” he said.
However, the firm had also lost its way on the High Street, with poor store environments that deterred customers. Ultimately, he said, people did not think of Mothercare first when it came to buying baby goods: “I think you would be hard-pressed to know what the brand stands for.”
Julie Palmer, partner at Begbies Traynor, said Mothercare had become “a byword for trouble on the High Street”, demonstrating “the failure of well-established brands to stay afloat”.
She added: “Other retailers, particularly those who have also previously filed for CVAs, will be concerned that these restructuring plans haven’t succeeded and a more radical approach may be required in order to survive.”
Richard Lim, boss of independent research consultancy Retail Economics, said: “This is perhaps one of the most highly anticipated collapses on the High Street… the cost-cutting operation and disposal of assets have not gone far enough to revive plummeting profits.
“Years of underinvestment in the online business and its inability to differentiate itself as a specialist for young families and expectant parents has been the root of its seemingly inevitable downfall. As competition has become fiercer they have been beaten on price, convenience and the overall customer experience.”