Covid-19: Mothercare delays Boots franchise deal, furloughs employees

Mothercare has announced that its franchise deal with Boots has been delayed following the “direct consequences” of Covid-19 on the group. 

In its latest update, the group said that the pandemic has “in particular given the disruption to both our franchise partners’ and suppliers’ businesses and operations”.

The group also said that government support for furloughed workers has been enacted for 430 of its Boots Mini-Club retail colleagues, due to their inability to work as normal, though this will “still result in incremental operating costs”.  

Mothercare also said that further material impact on short-term revenues was “likely” as its partners are facing “considerable challenges” due to the pandemic.  

The group acknowledged that it would “not be immune” to the effect of widespread store closures and restrictions on freedom of movement in different territories.

Its franchise deal with Boots UK has also seen an “inevitable delay” as a result of “operational priorities forced upon both businesses” in the wake of the virus. 

Mothercare had previously announced that Boots UK was to become the exclusive franchisee of the Mothercare brand following an agreed deal in December 2019. 

However, the group said that it “remains on track” with the deal, and is in the process of finalising the detailed contractual arrangements.

It anticipates that these arrangements will be finalised in late spring, and that a wider Mothercare product offer will be available online and in Boots stores from late summer 2020.

Clive Whiley, chairman of Mothercare, 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.”

He added: “We believe that the intrinsic value of our brand, the close contact fostered with our key stakeholders over the last two years and our seamless, deep understanding of the Group’s new trading cash flow dynamics, honed over the last six months, will prove to be extremely valuable.

“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.”

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