While retail sales increased in the UK and Indonesia in the 53 weeks to 30 March 2024 (FY24), Mothercare’s sales dive was largely attributed to partners “still clearing inventory" on suppressed demand during the pandemic. It explained this hit the Middle East hardest, which is its largest market with 41% of total retail sales.
The retailer began refinancing discussions with its lender in May 2023 due to higher interest rates.
In its latest statement, Mothercare is looking to renegotiate or refinance its debt facility as it warned it would miss covenants on the current loan, which has an interest rate of around 19.2%.
“Additionally, we are well advanced in looking at various financing alternatives (including equity and equity-linked structures) to give us both additional flexibility and reduced cash financing costs,” the company statement added.
Mothercare chairman Clive Whiley explained: “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.”
Mothercare key FY24 results
- Net worldwide retail sales by franchise partners of £281m ($352m) for the year, representing a decline of 13%
- Adjusted EBITDA marginally above £6.7m in 2023 and said to be in line with expectations
- Net debt of £14.7m at the year end.
Mothercare also pointed out global economic uncertainties are hampering retail sales and could impact its results in the 2025 financial year.
Despite this Mothercare said its medium-term guidance is “unchanged” as the retailer believes its continuing franchise operations remain capable of exceeding £10m operating profit with a continued focus on accelerating growth in existing and new markets.
