Mothercare collapses after sale to Myer family falls through: 44 stores at risk

Maternity and children’s clothing chain Mothercare Australia has entered administration after its sale to the Myer family fell through.

Brian Silvia and Antony Resnick of BRI Ferrier have been appointed as administrators of Mothercare Australia and its associated businesses Skansen, Skansen KCG and Baby on a Budget.

A spokesperson for the administrators, Todd Hayward, told SmartCompany that Mothercare’s 29 branded stores (some of which are co-located) and 19 Early Learning Centre and Kids Central stores across Australia and New Zealand would continue to trade while in administration.

Hayward told SmartCompany the administrators are assessing the viability of the stores both individually and across the group as a whole.

“The administrators are looking to sell the business as a going concern in whole or in part, the stores will continue to trade while the assessment of the viability of the stores and group continues,” he said.

“That is expected to conclude in the next few days and talks have started with interested parties.”

Mothercare Australia announced to the Australian Securities Exchange yesterday the administration followed the Myer family terminating a deal agreed to in November last year for the business to be sold to Myer Family Company Holdings after “some conditions were not fulfilled or waved [sic]”.

The deal with the Myer family, which was approved by Mothercare Australia’s shareholders and note holders in December, had been hailed as a case of retail royalty to the rescue of the ailing retailer, which had to enter a trading halt last year.

A spokesperson for the Myer family told SmartCompany the deal to buy Mothercare Australia was off.

“They are not prepared to resurrect the deal from November but as they have a detailed understanding of the business they remain interested in the process that is currently taking place with the administrator,” he says.

Mothercare Australia has been in strife after losing $21.3 million last year when it was kept afloat by loans of $1.5 million in June and $1 million in July from existing shareholders including the Myer Family.

The maternity and children’s clothing chain is a relatively new entrant to the Australian retail market, with its first store opening in March 2010. However, the retailer is well established in the United Kingdom where it has been operating since 1961.

Mothercare has been franchising operations since 1968 and currently has over 1,000 stores globally, and its stores across Australia and New Zealand were backed and part-owned by Mothercare in the United Kingdom.

However, the British retailer has been suffering its own problems after posting a 7.4% fall in third quarter total group sales and making Mothercare’s UK boss Mike Logue redundant on Wednesday.

Mothercare UK said in a statement overnight that the Australian Mothercare accounts for 7% of international retail sales and the impact of its collapse would be limited.

“The expected profit impact is minimal and does not change our overall view of international profitability going forward,” it said.

Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany Mothercare Australia’s problems stem from not making the profits it needed to make relative to its overheads.

“Australia is a very competitive market and while Mothercare is well known in the UK and other countries, this is a business which needs scale and volume,” he says.

“It’s really been caught in a cycle of weaker consumer demand and significant price wars with competitors.”

Walker says Mothercare UK probably just did not see light at the end of the tunnel for the Australian retailer, while the Myer family was looking at what the future of the business was and whether Mothercare Australia was core to it.

“The UK parent was taking write-downs of its investment in Australia of $16 million and at a high level it was just not paying its way,” he says.

 

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