The Myer family is returning to retail and taking control of Mothercare Australia under an agreement reached this week and supported by Mothercare UK.
In a statement to the Australian Securities Exchange, Mothercare chairman Robert Gavshon announced the deal and said the Myer Family Company would subscribe for a note of $500,000 to provide the baby clothing retailer with working capital.
“The Myer Family intends to continue to build Mothercare, the world’s leading mother and baby retailer, into a major player in the Australian and New Zealand markets,” Gavshon said in the statement.
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The deal follows a review of Mothercare’s strategic options and funding after the company was forced to enter a trading halt earlier this month as it sought investment.
Mothercare operates 29 Mothercare-branded parenting and baby stores and 19 Early Learning Centre and Kids Central stores across Australia and New Zealand. But last year it lost $21.3 million and was kept afloat by loans of $1.5 million in June and $1 million in July from existing shareholders including the Myer Family.
The Myer Family’s latest move is subject to certain conditions, including the approval of the company’s bankers.
Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany the Myer Family’s involvement in the retailer was likely to be significant.
“The Myer Family provided a bridging loan of $2.5 million so they are keen to see a return in that and there is no doubt this business has underperformed in relation to its targets,” Walker says.
“It’s a business that is haemorrhaging all over the place and it has lost its sharp point of difference here.”
Walker says he expects the Myer Family will have a clear presence on the Mothercare board and have a clear role in Mothercare’s strategy.
“The Myer Family are synonymous with retail in this country and they have extraordinary board members and a vast network in this country,” he says.
“I don’t see them as silent or distant shareholders; maybe if it was a business that was trading well that would be the case but they are not historically known for that.”
However, Walker cautions it is unlikely to be smooth sailing for the iconic family company.
“Whether they have the resource to embrace the new order of retail remains to be seen,” he says.
“They are a very traditional organisation and known for their philanthropy and involvement in institutions, but I do see them as quite conservative and we are in a world now of omni-channel retailing, different technology and global consumers.”
Walker says as the Myer Family had already provided so much funding to Mothercare the family company may have felt it had no choice but to step in.
“They are already in the game so what real choice did they have?”, he says.