Updating on its preliminary results for FY23 Mothercare revealed it had beaten analyst expectations on adjusted EBITDA, with industry onlookers optimistic about the position the retailer will be in once it completes its refinance process and delivers over £10m in operating profit from its franchise operations.

While its FY23 performance was mixed with net worldwide retail sales from franchise partners falling to £323m from £385.3m, the figures do exclude contributions from the Russian market. When looking just at continuing markets, sales were actually up 9%.

Mothercare FY23 numbers overview

• Adusted EBITDA £6.7m vs £12m
• Adjusted operating profit down 44% to £6.2m
• Statutory loss £0.1m

Mothercare shifted to a franchise-only model in 2019 on the back of falling sales and following a CVA store closure programme as part of turnaround efforts that started in 2018.

In November 2021, the move paid off with it swinging to profit for the 52 weeks ending 28 March.

But in June this year, CEO Daniel Le Vesconte was released just five months into the role after conceding the move was in the best interests of the company and its shareholders.

Le Vesconte held previous roles with Abercrombie and Fitch (A&F Corp), Hollister and Gilly Hicks, Dr Martens (Dr Martens PLC), the Wolverine Worldwide group of brands and Vans and Reef for VF Corp.

Eleonora Dani and Clive Black of Shorecap comment a renewed search for a CEO has commenced as interim management takes the helm.

“The renewed CEO search signifies a critical juncture for the company, and the appointment will be pivotal in steering Mothercare's strategy and financial performance moving forward.”

Chairman Clive Whiley says going forward, Mothercare is focused on protecting the brand IP, “in a solvent business structure, for the benefit of all stakeholders.”

Under this objective, it plans to continue to reduce the combined business and pension schemes financing requirement while putting in place adequate working capital facilities and eliminating the current unsustainable cash financing charges; sponsor growth in its partner's retail sales and store footprint; explore new territories and additional routes to market.

“All of these objectives will help to improve the profitability and covenant of the underlying business for actuarial pension and stock market rating purposes alike.
Hence, we believe that the enormous effort applied over the last five years has finally provided line-of-sight to rebalancing the Mothercare brand IP value in a way that also promotes growth in our royalty income.”

Whiley added Mothercare remains mindful of the impact the pandemic had on franchise partners’ profitability and leading to them having to clear old inventory, reduce costs and the levels of investment they have been able to make in their businesses.

“This is likely to mean that the return to pre-pandemic levels of trading will take longer and we are working with our partners to assist that recovery, ultimately benefitting both our own business and our franchise partners in the longer term.

“We continue to make ongoing improvements in product and service but these will not offset completely the above factors which will continue to impact the group results for the financial year to March 2024 and beyond.”

The group is also betting big on its refinancing programme aimed to deliver £10m in operating profit.

“In short, we are now focused on both restoring critical mass and monetising the Mothercare global brand IP. This is an exciting prospect for our partners, our colleagues and all our stakeholders alike as we finally leave behind the turmoil of recent years.”