Mothercare accelerates plans to 'restore critical mass' after sales drop

Mothercare plc, the British heritage brand has announced its full-year results for the period ending March 29, 2025, revealing a significant drop in retail sales and profitability, alongside key strategic moves to improve its financial structure.

Worldwide retail sales by the company's franchise partners fell to 230.6 million pounds, resulting in a reduced adjusted EBITDA of 3.5 million pounds, down from 6.9 million pounds last year, which led to an adjusted loss before taxation of 2.5 million pounds. The decline in sales was largely attributed to continuing uncertainty in the Middle East and the winding down of the exclusive distribution arrangement with Boots in the UK.

Despite the drop in sales, Mothercare has substantially improved its balance sheet through a new joint venture and refinancing. The most significant financial move was the creation of a joint venture for the South Asian region with Reliance Brands Ltd.. The deal, which valued the South Asian IP rights at 30 million pounds, saw Reliance acquire a 51 percent stake in the new joint venture for 16 million pounds.

Mothercare applied part of the 11.5 million pounds in net cash proceeds to refinance its existing debt with Gordon Brothers, reducing its term loan from 19.5 million pounds to 8 million pounds at significantly lower interest rates. This restructuring reduced the company's net borrowings to just 3.7 million pounds at year-end.

Chairman Clive Whiley commented that the company is now focused on reversing the "dis-economies of scale" caused by the halving of its franchise partners' store footprint over the last five years. He highlighted that the current business model is significantly underutilised and that increased volumes would result in the "vast majority of increased income falling straight to the bottom line."

The company is currently in discussions with "several other parties to restore critical mass, especially in the UK market," where the brand is highly recognised. The company's future growth strategy will leverage the new JV in South Asia and a new 10-year license agreement with Turkish retailer Ebebek Mağazacılık A.Ş.