Mothercare enters refinancing talks amid sales decline

Mothercare is exploring its refinancing options after sales fell by 13% to £281m in the year ended 30 March 2024, down from £323m the prior year.According to the group, retail sales were affected by global economic uncertainties, as well as partners still clearing inventory due to suppressed demand during Covid.

In particular, its Middle East markets, which account for 41% of its total retail sales, were the “most challenging” markets over the year. UK sales rose year-on-year, however.

In its pre-close trading update, the group also said adjusted EBITDA is expected to be marginally above the £6.7m reported the prior year, in line with market expectations, “showing a continuing year on year improvement in the underlying profitability of the business”. 

With interest rates remaining high, the interest rate on Mothercare’s existing loan facility is currently around 19.2%, meaning the group requires waivers to its covenant tests. 

In light of this and its sales performance, it has now entered refinancing discussions to “vary, renegotiate or refinance” its debt facility. The group said it is also looking at various financing alternatives to give it “both additional flexibility and reduced cash financing costs”. 

Clive Whiley, chairman of Mothercare, said: “As highlighted in my last chairman’s statement, it has been six years of hard work and transformative change for the group and, on behalf of the board, I would like to thank our colleagues across the business, alongside our pension trustees and all other stakeholders for their unstinting support during these difficult times. 

“That support and the resilience we have built into the business throughout this journey, allows us to deal with the major challenges we have faced and Mothercare operations would not be in the profitable and cash generative position we are today without it.”

He added: “Given the exogenous factors influencing some of the company’s operating markets, our immediate priority remains to support our franchise partners, ultimately for the benefit of our own business, however we have also redoubled our efforts to restore critical mass and are focused upon monetising the Mothercare global brand IP. This remains an exciting prospect for our partners, our colleagues and all stakeholders.”